Forget 7.1, get the largest plasma you can, and the best two channel to go with it, less stuff,better music. So what if you don't have breaking glass at the back of the room.
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How much ambient light in the room? If you have blackout shades/window coverings and very low ambient light then go with a DLP or LCD projector. If there is a lot of ambient like then plasma is the better way to go. How big is the room? Anything smaller then 20x16 and your wasting your time with 7.1; do 5.1 instead and save some money. You can purchase a 92" Da-lite Da-mat fixed screen for about $350.00 delivered. Don't waste your time with wall paint, the picture is a lot better on a screen. Anyway, if your looking at 50" plasmas, I think you can afford a fixed screen.
I went through this same crises a few months ago. Could not decide between plasma and a projector. Ended up with a panasonic HD projector and I'm very happy. It doesn't do the blacks of a tube, neither does plasma, but the size of the screen is worth the trade off (IMO). I ended up spending $4300.00 for projector, screen, cables and room remodel!
It is difficult to go from audiophile to inwall speakers. Pay special attention to your fronts and center speaker.
I have a projector for my larger screening room. it is high definition and it is great for when I have friends over. Monday night football is truly fantastic on my Satellite feed.
the projector creates more of a theatre atmosphere where the film is the center of attention. Plasma is more friendly for interactive talk.
The room is 20 x 14 and I guess I can get some type of blackout shades. I am Keeping my Aerial 10ts/LP12/Tube stereo and I plan to get a receiver like the Marantz 9200, H/K 7200 or Sunfire to run the home theater system and go 5.1 . So far the Triads look very nice, I also like the Speakercraft inwalls too. I want the HT system to rock so when its really hot in the summer I can give the tube system a break. Thanks!
1. You cannot achieve an immersive field of view at reasonable seating distances without using two-piece projection (front or rear, with rear meaning a separate room with a projector and not a consumer RPTV). Here you must leave your TV perceptions behind and think in terms of movie theaters where a good THX cinema provides a 36 degree subtended field of vision in the LAST row. DVD is softer than film so only a few people try to approximate a midle-of-the-cinema feel (I don't think this is unachievable with a CRT and wider than 16:9 screen), instead opting for a back-row experience. Along those lines, if you want to sit 12' from the screen most people prefer something about 8' wide (110" diagonal). Nice home-theater viewing distances for 42 and 50" diagonal 16:9 screens would be arround arround 55 and 65" respectively which doesn't work if the screen isn't on your coffee table.
2. Front projection does not work well without light control. As a minimum you need blackout blinds (they're opaque, but can be nice neutral colors) on all windows. Darker walls will improve the picture farther. Grey screens help some on digital projectors.
3. I think the screen door artifact from LCD projectors makes them unsuitable for home theater use (they preclude sitting close enough to have a theatrical experience). DLPs give a very small percentage of people headaches, and more people notice a rainbow artifact (I get the headaches). Try one before you buy. Reflective LCD (LCOS, DILA) is supposed to offer DLP-like fill without the artifacts. I use a CRT on an 87x49" screen with the front row 11' out. If you can accomodate the screen size (a lot of us think 8' wide is a limit for flat screens with moderate gain), placement (no zoom, ceiling mount even with where you want to sit)), and setup hassles you can't beat the picture quality or value on a used 8" or better CRT with electromagnetic focus.
4. If your stereo speakers can handle the levels you'll want (peaks approaching 100-105dB at your seats) and you have them positioned on your screen wall, you'll want to use them. If your main system lacks the amplification to get them there, you can get automatable speaker level switches. They can be high-passed for home theater use where the bass requirements are excessive (ex: I run my Linkwitz Orions full-range on music, high-passed 2nd order @ 80Hz for home theater). If you find the screen too reflective acoustically, you can use a retractable or perforated screen in front of your preferred wall treatments. Etc.
5. In my room (13' W x 19' L x 8' H) a 7.1 speaker array using Logic-7 was a quantum improvement over 5.1 - the surround field is more seamless and L7 does interesting things with effects.
6. Getting the box (direct view TV) out from between my speakers did huge things for my imaging capabilities. You really want a flat display.
7. 2 good speakers still beat 6 or 8 bad ones. Remember that movies have musical scores and you have a great frame of reference for them.
Have fun! While two rooms would be better, it's not unreasonable to get good audio+video performance in one although one will be somewhat compromised.