1080p is nice for front PJ. But it is not absolutely necessary.

A decent PJ and screen can run you less than a $1,000. New cables will probably be required.

I got the Mitsubishi HC-1500 (720p) for under $700 and my screen for less than $250 - it's a fixed frame white screen with a black velvet border.

1080p will cost about $1000 to $1500 more. The screen won't change. Carada and some other companies make great screens. But in a dark room (especially given today's high contrast, generously bright projectors), a high gain screen is not really necessary. The big problem with PJ is the throw distance and the room's light control. If you've got a pretty straight shot, roughly 12 to 15 feet from the screen, perpendicular thereto, and a room with plenty of black out curtains, it can definitely work. 100" is a thing to behold.

HD stuff looks great. DVD looks a little fuzzy when it's blown up to 100". Blu Ray looks absolutely gorgeous. I'm sure 1080p projector would look even better with Blu Ray, but for my money, right now, I think I will be hard pressed to upgrade before the 1080p prices come way down. Big Screen projectors, pretty much, though require a Blu Ray player to really enjoy them.

I think I mentioned above, though. The projector is a great experience for watching movies - like you're at the movies, in fact. It's a bit ridiculous for casual viewing, like watching the news. This is especially true when you consider the fact that he bulbs burn out every couple of years with moderate use. You can expect to change your bulb every year and a half to two years if it is your primary TV. Then's there the minor hassle of having to let the bulb warm up. Every time the PJ goes on, you have to wait about 30 seconds before you see anything, which can be a PITA.

In re: screens. Many a company want to sell you awesome screen materials with crazy crystals all over them, and charge you more than you paid for the PJ. It's your money, but I avoided those guys. Honestly, I don't want to know if there is a big difference between these screens, but I am very skeptical that, in a totally dark room, the screen material is going to make the image better. Brighter? Maybe. But, as I said before, todays PJs are plenty bright, especially in a dark room.

If you want more advice, though, I did tons of research before purchasing, so feel free to ask.