Ok so I've read a bunch of articles on here but I just registered today. We are finishing our basement in the next few months and I wanted to keep an eye out for or even purchase some of the stuff soon.

First things first, I need a projector. The max wall space I have is 115" x 66" but I'm probably going to make the image a bit smaller. We will be about 10' - 15' away. the projector will be a few feet further back.

For the equipment I have planned:
-Xbox 360 (non hdmi unit) - Connected via Component
-Ps3, mainly for bluray - Connected via HDMI
-Wii, Connected via Component
-Toshiba HD DVD player, we have it so might as well use it for the movies that are available - Connected via HDMI
-Dish HD DVR box - Connected via HDMI
-Receiver, not sure if I should just get 5.1 (maybe 6.1, 7.1 - but that's a whole other story)

So depending on the receiver's ability to consolidate HDMI signals, I'll need two (probably only one with the receiver) component in and probably at least one HDMI in. I'd like it to be at least 720p, maybe 1080p if I can afford it, 16x9.

Can someone recommend me a unit under a $1000... Maybe a link to a good source of multiple units? What brands are good? What are the most important specs to look at for a projector - lumen output?

http://www.projectorreviews.com/
http://www.projectorcentral.com/

A good 7.1 receiver will be a future proof investment. Take a look at Onkyo 606 w/4 HDMI in, 2 components in and analog to digital video conversion.
Depending on the ambient light condition. You may require more light output if your basement will have poor light control. Otherwise any projector will give you a very nice image. A lot of people are recommending the Sharp DT510, Mitsubishi HC1500 and Optoma HD65 all DLP projectors and under $1,000. LCD projectors will have lenshift for placement flexibility. If you decide to get DLP make sure you see a DLP projection TV or a projector to confirm you are not DLP rainbow sensitive.

Projector reviews is a good site for anyone getting into the FP hobby. Simple plain english information.

Well we do have a 56" Samsung DLP in our family room and none of us notice any rainbows or anything (besides the warm up time!). We also will have full control of lighting, will be able to go very dark since there are only 2 main sources of light which will have thick dark shades. Mainly for the price point we will be going DLP.

Been looking through a bunch of threads and I think the HC1500 will do what I need it to do.

If I do go ahead and get a 7.1 received (I was also looking at the Onkyo 605 and 606) I can still run it in 5.1 for the time being without any issues right? - I don't see why I wouldn't be able to, but I haven't done a whole lot of research into them.

Well we do have a 56" Samsung DLP in our family room and none of us notice any rainbows or anything (besides the warm up time!). We also will have full control of lighting, will be able to go very dark since there are only 2 main sources of light which will have thick dark shades. Mainly for the price point we will be going DLP.

Been looking through a bunch of threads and I think the HC1500 will do what I need it to do.

If I do go ahead and get a 7.1 received (I was also looking at the Onkyo 605 and 606) I can still run it in 5.1 for the time being without any issues right? - I don't see why I wouldn't be able to, but I haven't done a whole lot of research into them.

Yes, that is correct.

Ok so the 606 doesn't come with speakers... I think for the time being I'll pick up the HT-S5100 Onkyo 7.1 receiver since it includes speakers and a sub which I can upgrade down the line...

My question, I know the S5100 doesn't do audio over hdmi, will using optical cables for the HD-DVD, PS3, and Xbox sound different than going straight through HDMI? I'll still be able to get 5.1 - 7.1 out right?

You should be able to get DD 5.1 out from the PS3, HD-DVD and xbox. The receiver if is able can upconvert 5.1 to 7.1 but you'll not get uncompressed audio (PS3) if it does not handle audio over HDMI. And I am guessing the S5100 will not have HD audio formats decoding.

Saw that eBay was having another 25% deal with live.com search... pulled the trigger on a sharp dt-510 and a onkyo tx-sr606... I can use the crappy zenith speakers from my old 5.1 setup until I find some speakers to pair it up with, and until we actually finish our basement! Can't wait to check them out!

With a onkyo 606 you'd amazed what you zenith speaker will sound like. If you basement is not yet finished make sure you use something to cover the equipments when not in use, air filter may also be a good idea. For all you cabling need go check monopice.com.