This seems to do what you're looking for:
inds <- unique(test$index)
test[, (inds) := lapply(inds, function(x) index == x)]
which gives
index var1 a b c d e f g h i j
1: a 0.25331851 TRUE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE
2: b -0.02854676 FALSE TRUE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE
3: c -0.04287046 FALSE FALSE TRUE FALSE FALSE FALSE FALSE FALSE FALSE FALSE
4: d 1.36860228 FALSE FALSE FALSE TRUE FALSE FALSE FALSE FALSE FALSE FALSE
5: e -0.22577099 FALSE FALSE FALSE FALSE TRUE FALSE FALSE FALSE FALSE FALSE
---
996: f -1.02040059 FALSE FALSE FALSE FALSE FALSE TRUE FALSE FALSE FALSE FALSE
997: g -1.31345092 FALSE FALSE FALSE FALSE FALSE FALSE TRUE FALSE FALSE FALSE
998: h -0.49448088 FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE FALSE FALSE
999: i 1.75175715 FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE FALSE
1000: j 0.05576477 FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE
Here's another way:
dcast(test, index + var1 ~ index, fun = length)
# or, if you want to preserve row order
dcast(test[, r := .I], r + index + var1 ~ index, fun = length)[, r := NULL]
And another:
rs = split(seq(nrow(test)), test$index)
test[, names(rs) := FALSE ]
for (n in names(rs)) set(test, i = rs[[n]], j = n, v = TRUE )
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