Room 16'w x 18'l
Likely screen: 120" Optoma Grey Wolf II
Ambient light controlled: Yes, but if we are playing Wii the lights will be on
Likely seating: 12-15' (1.2 to 1.5)
Uses: Movies, Wii, Sports (in that order).

Questions:
1. Assuming I want to spend < $1500, am I going to be happier if I went with a high-end 720p (Panny AX200U) or go with super discounted 1080p (Mitsu HC-1500, Sanyo Z2000)?
2. Will we notice the difference if we spend another $800+ and get to a higher-end 1080p (Epson, BenQ, Panny).
3. Will I do better downsizing to 106"?
4. Do I want to hook the Wii directly to the projector, or through the Yamaha A/V receiver? Is there a lag concern? Does "game mode" matter?
5. Which of the aforementioned projectors does best with "SD" content?

Any advice you can offer is highly appreciated. Thanks in advance, I've learned so much from you all!

Go with the Panasonic AX200u.

At that seating distance and screen size the Pannys smooth screen will eliminate SDE.

The Epson HC720 would be another good option. Especially with the current deal on it. You might see the SDE though if you are looking for it. It does have a few video modes that will be bright enough for gaming with some lights on.

I don't think there will be any lag running the projector through the receiver. You will have to try it to find out for sure.

Both the Epson and the Panny will be bright enough for a 120" screen. If you go with a lower model 1080p make sure it is bright enough. The reason I didn't go with a 1080p right now is the lower end models aren't bright enough for my 18' throw distance and 120" screen.

You didn't mention your throw distance. That can have a big affect on brightness.

Rick,

It sounds like a 720p projector would suit your needs. The rebate for the Mitsubishi ended so the Sanyo would be the cheapest option (for 1080p). I have the 4900 and am very happy with it, but it appears none of your sources are 1080p anyway. If you do plan on getting a Blu-Ray player in the near future, you may want to consider 1080p. What is your throw distance? I don't suspect you will have any lag time hooking the Wii into your receiver. Is your receiver HDMI? I have my Wii hooked into my receiver (Onkyo) and there is zero lag time.

You didn't mention your throw distance. That can have a big affect on brightness.

Thanks. I am going to ceiling mount so will throw with as little distance as possible (based on the projector).

Rick,
Is your receiver HDMI? I have my Wii hooked into my receiver (Onkyo) and there is zero lag time.

Yes, it is and HDMI switcher.