"Bluffin' with my muffin" means that while a woman is having sex with a guy, she is thinking sexually of a woman. The guy thinks the woman is aroused by him, but she's really aroused by her sexual thoughts of a woman.
Muffin, in itself just means a cute nickname..It can mean your fluffy,as in muffintop..It can be derogatory as in buttering a muffin,which means "popping your cherry"