Yeah you'll notice all are recommending a large screen FP set up. There's indeed no replacment for an excellent image on a large screen for impact!..no doubt. Still, unless your buying a used (referbed) front PRojetion CRT unit(bulky, and outdated a bit for convenience and the times), your challenges at your price range for front projection are black level and resolution(to a lesser degree) from the affordable DLP and LCD units...that and rainbows/headaches from single chip 3 color segment color wheeled DLP units.
IF you like a unit, you can balance a rather large maybe 110+ inch 16x9 image in that room! Still, is the picture quality overall satisfactory to you? You can always run down to the local Best Buy, and pick up an Infocus X1, show it on a piece of cheep foam core poster board($20-40) and judge for yourself! Black level will be improved with the expensive "grayhawk/Firehawk" screens at $1800 range new however, which adds to the cost. Still, trying this "demo" route will let you know what you're dealing with with cheeper DLP. With LCD, you don't get the rainbows, same black level, same kind of rez, but screen door at larger image size, and questionable black level(watch dark movies).
In my opinion?..your only real obstacle with trying to get a large (exciting) image is the black level at this point! It is highly desireable to ultimately end up with a large front projected image, and the resolution for even DVD's is superb upto the 100" range from even 12 feet away!..very good with some of these little projector units. Still, black level??????
With Big screens that are properly calibrated, there are no such problems really. Although, you are limited by slightly different factors with some of these RPTV's. But, you can dial them in for a pretty world class picture from a qualified person. And you could get upto maybe 65"(16x9) in your room with good set up. Hummmmm.
With the prices right now as cheep as they are for large RPTV CRT based units, and given the picture quality with some of these Toshiba, Sony, Pioneer, even Mitz's and such, you might strongly consider one of these temporarily. YOu can always sell it later, or move it to another room when front projection improves down to the lower price points. Right now, I think the better DLP's and Lcos bassed units are too much for your budget. These give simply superb images!
You can also buy a used CRT FP unit in your price range, but do you want the bulk and complication?
Yeah, that's a tough one. Still, I'd check out a projector first, and decide. Everyone who's seen my Sanyo Z1 on a 95" screen in my smallish sized room goes "wow!". But to me, the black sceens make me want to SERIOUSLY consider a more expensive projector, which I'm waiting on. If I had a CRT unit, I might not be so anxious. You decide
BTW, you can pick up a superb 60"+ RPTV from Toshiba, that's really really good for around the $2000-2500 range! This is amazing how cheep it is for what you get. But, then again...