I love projectors. I have a Mitsubishi HC1500 projector i use for my main TV in our family room. It is a 720p native projector that i picked up for around $900 about 2 years ago, the picture quality is awesome at 102"
the biggest problems with projectors is lighting. even very expensive projectors don't perfrom that well with alot of light. If you have it in a room with heavy curtains and can make it really dark, then a projector can look amazing. Depending on the content, they can work fairly well in moderate light conditions. it really depends on the content....for instance, i can play New Super Mario Bros Wii with the lights on and everything is good, but the room has to be nice and dark if i want to play Bioshock 2, or you can't see what you are doing.
i have an older projector that i used as my main TV before i bought this mitsubishi..it is an infocus x1. it has a resolution of 800x600 and is not nearly as bright as my mitsubishi. it works pretty well, as long as it is really dark. also, the bigger you make the image, the darker it will look. i now use my old projector for outdoor movies. i have two king size bed sheets that have been sewn together that we hang on the side of the house. this setup works ok, but it needs to be pretty dark out (here we have to wait till about 9:30pm) and generally we try to watch kids movies that are bright and vivid. this can be alot of fun when you get a bunch of people together. i'm also thinking that this year we will be doing some back yard wii sports or something.
if you want a nice big display for not too much money, you can't go wrong with a projector, as long as you can control the light in the room