Well, this has been my experience with the projector and screen.
It was a nice den with the whole theatre look setup, and the guy had a decent projector and a huge screen with 7.1 surround sound (although we're not talking about sound). My personal opinion is that the projector looks great. I'm not sure what the exact specs of his projector were, but the refresh rate kept right up with whatever you played, whether it was movies or games.
He used a demo disk to show off some things like the color depth it could handle, and it was fabulous, and there was a scene from Star Wars Episode III and like I said before, the refresh rate kept up with it and everything.
Considering that getting a plasma screen would cost about $8000 for the size he had, the projector and screen is the way to go. It also makes things easier to move around and whatnot. The only drawback that I see is that it may take some time to callibrate it for what you need.