Whether you should go the projector route, as Ray and others have said, really depends on what you are most looking for in a video display.

I've got a projector and love it. Like you, I found a great deal and went for it. I watch 80% DVD movies with the odd audio DVD and VHS movie thrown in. I watch very little TV and it is set up in the basement with maximum light control so it was an easy decision (no brainer) for me. When I do watch TV (mostly news and the odd hockey game) I usually use my old 21" CRT. That's because I have what my co-workers call "peasant TV", an antenna. Reception isn't very good and when I use the projector the large image just enhances all the imperfections of the poor quality signal. If I watched a lot of TV I'd want to use the projector and then I think I'd invest in HDTV service. For a while I had cable TV and it was ok through the projector, but I had to be happy with a fairly soft focus image.

Something else to consider is you have a lot of windows in that room. At 1200 lumens, it will be important for you to control lighting or the picture will wash out (particularly the blacks). This calculator at Projector Central will give you an idea of what levels of ambient light the picture starts to degrade significantly for various throw distances.

Before I purchased I borrowed a projector from work and brought it home a couple weekends in a row to see if it was what I was looking for. If you've got similar access to one you might consider test driving one at home.

I'm cheap and always looking for the best bang for the buck (like the Axioms for sound). You've found a great deal, especially if you aren't inclined to go the DIY route for a screen. If I were purchasing all over again I'd also go the 720P route (till the 1080P's come down in price and the Blue-Ray/HDDVD war resolves itself - could be a few years) and, like Tom, give the Mitsubishi HD1000U a hard look. It is an Editors choice at Projector Central and sells for $1000. The Sanyo Z5 and Panny PT-AX100U get awesome ratings and are more versatile in terms of rooms they will project beautifully in. But of course they are about double the $$.

Good luck in your decision.