This is the single most expensive component in this project. It's also the piece that makes it all possible. I followed the various projector forums on AVS Forum for many months before making a selection. My criteria were:
I want XGA (1024x768) as a minimum. I've seen SVGA (800x600) projectors and the pixel structure is too evident to me. Of course, higher resolution is almost always better (for hi-def TV someday), but the bulk of today's projectors max out at XGA.
I don't have complete light control in the room, but I plan on the bulk of viewing being done at night. Even so, I like a light on once and a while. I figured I needed at least 1000 lumens, preferably 1500+.
The more the better. Good LCD projectors max out at about 400:1 contract ratio, with the best in the 800:1 range. DLP projectors just get started at about 800:1 and go to about 1500:1 for really high end. Other Technologies (LCOS) can go higher but the price goes way up.
LCD or DLP is in my range. The two big pros/cons between these two for me are: screendoor with LCD (a thin black grid between the pixels), and rainbows with DLP (fast moving bright lights can produce a "rainbow" of colors for some people). I've seen and XGA LCD projector and the screendoor effect was evident, but may be forgotten during a movie. I was able to borrow an XGA DLP projector with a 1x color wheel and luckily I didn't see many rainbows unless I tried. I'd like to stick with DLP, but maybe a newer generation with a faster color wheel.
I don't have megabucks to spend, but I've been saving my pennies and my wife is supportive of my hobbies (that's an understatement). I'm looking to spend between $2K and $3K.
The ideal projector doesn't make any noise, but given the wattage of the bulbs in modern projectors, you have to get rid of the heat, so fans are the norm. 30 dB is a good target, less is better. Remember, a 6 dB increase means it's twice as loud, and a 6 dB decrease means it's half as loud.
Based on my criteria and all the research I did, I chose the Sharp PG-M20X. The basic specs as they relate to my criteria are: I hit all my targets except for noise. The projector is a little louder than I'd like, but I expect the projector lift will help obscure it, and you quickly forget about it when you're involved with a movie.

Here's a picture of the unit. It's pretty small at about 12" x 8" x 3" and 5 lbs. I've been using it occasionally, on a step ladder, to watch some TV and movies and I'm quite happy with it. The picture is sharp, colors are wonderful, and I've paid it off already.