Don’t exaggerate -- show where and how they can improve. Don’t put the candidate on a pedestal. Not only does it not look plausible, it will also set expectations for them that will be next to impossible to meet. If they have an Achille’s heel, don’t exaggerate it, but don’t hide it, either.
Get feedback. If you’re not sure of your letter-writing skills, or if your letter will carry a great deal of weight for the candidate’s application, ask for feedback from a trusted colleague who may also know the candidate. If you are putting your reputation on the line for this person, you want to put your best foot forward with this letter.