I guess I do something that's a bit mixed. I wouldn't say that I write anything like a professional game design document, but since I just work by myself, I just need to order things in a way that I can refer to later and don't really have to present it in a way that anyone else has to decipher.
I know I'm quite visual, so I'll often make sketches, draw flow charts and make a lot of notes. I'll keep my loose notes mostly separate from the more considered guide-lines, but I'll also write my current focus on a white board to keep myself on track.
If I've come up with some guidelines that I've decided to use for some 2D artwork, I might have rules on resolution, frames-per-second for animations, colour usage and forms to focus on, but I'll also jot down my thoughts on the work in my loose notes, little things like feelings, associations or currently unanswered questions that I get from the work, which might help with additional visual ideas, maybe how I want to compose the music or even make small programming changes.
Sometimes it takes a while, but once the pieces start to work together; it feels like the overall project is going in a specific direction and things start to feel like they logically flow and fit together, so it's more like slotting puzzle pieces into a half completed jigsaw puzzle instead of staring at a blank page.