As Sushi has mentioned some people have high sensitivity to the rainbows. First of do NOT look for it. Secondly when you do see it give it a week or two. Most people that have posted reviews do get accustomed to it and don't see it after 3 days. It is similar to when people get accustomed to the sound of the M22 as you keep playing it. The harshness goes away. Most people that have come over to my place never once complained about the rainbows. I did not even mentioned it to them. I also have been watching their eyes to see if they are blinking or having eye strain. (Yah I know ... I am doing tests on my friends. But what they don't know wont hurt them )
I have demoed both and both are excellent. The Z1 maybe a little brighter. But the contrast (between the darks and lights in color) on the X1 are a bit better. The X1 seems a little dimmer and give that film-like presentation.
The Z1 is a 16:9 projector. Great for HD and widescreen DVD content. But I have a lot of 4:3 content such as cable TV, full screen movies and a PS2. So the X1 was definitely more suited for my purposes.
Also as I mentioned earlier the X1 does look better than the Z1 when the projector is less than 10 feet from the wall. The screen door at this distance is noticeable without defocusing. With the projectors at 12 feet from the screen both will have equally the same resolution and clarity.
I am going to post screen shots hopefully tonight (If I get my damn webserver running...I was hit by the blaster virus..so I just rebuilt the server). Do also get a proper screen. The PQ of the FP does increase depending on what screen you get and how much ambient light comes into that room. Blackout fabric as Sushi mentioned to me is a must to get a better picture. Also your source is important. Progressive DVD to component breakout VGA or Progressive DVD or non progressive DVD to component breakout SVIDEO. Depending on how good the scaler is on you DVD player you may want to use or not use the Faroudja scaler on the X1. IMO the best picture quality through MY tests is building a HTPC (Home Theater PC with a nice ATI Radeon card and using a NVidia NVDVD player, with SPDif output(output DTS and Dolby Digital to a reciever)) People usually build their own HTPC but nowadays more computer shops and manufacturers build one for you as a package including a remote.

http://www.msicomputer.com/product/detail_spec/product_detail.asp?model=MEGA_651
http://usa.asus.com/products/desktop/pundit/overview.htm

This is what I use due to its upgradeability:
http://www.american-media.com/index-CFS968.html