I have a Ruby in my living room projecting onto a 126" HP masking screen. Walls & carpet are beige. Blinds & 12' ceilings are white. The room is very open, so the reflected light onto the screen isn't as bad as it would be in a shoebox, but still far from perfect.

The stock Ruby was a big improvement over my calibrated G15 w/ isco II despite the room being less than perfect.

Can I make that same jump in quality again with anything out now? Or will my room bottleneck further improvements?

I would add a dedicated HT to my house in a heartbeat, but the HOA won't allow it. So I'm at the point now, do I upgrade my gear or save the money for a better room (with the requisite new house attached)? What makes more sense?

I don't know how a Ruby compares to my HD350, but last night I was doing some adjustments to my Lumagen settings and fired up the PJ to do it. Normally when I watch a film I put up a temporary 'tent' that comes out nearly 1x screen width and put some black velvet on the floor in front of the screen, this gives really good results, to the point where it's hard to imagine how the image could be further improved. As I was just 'fiddling' I simply lowered the screen and left the room as it normally is.

My 'straight room' not dissimilar to yours; light grey walls, white ceiling, Oak floor. After I'd done the adjustments on the HDQ I left the PJ on and watched some TV (just a bit of CSI Miami which normally looks pretty colourful) and it looked really washed out. As it was 16:9 content I have sidebars on my 2.35:1 screen and these literally looked mid grey (usually they are dark enough that I haven't rushed to make up my velvet side masks). I sat there thinking how poor the image was and only the fact it was getting late prevented me from bothering to put up the 'tent'.

If that was my typical viewing condition I think I'd hardly bother watching on it TBH. The only option would be a more directional screen or maybe a grey one (would have made my life easier as I managed to paint the screen wall dark brown, but anything else won't get past 'the planing commitee' ;)). Maybe if your screen is in a shadow box (or maybe more directional than my Matt White) then your image may be better than I saw last night (sure hope so), but if it isn't, then I'd suggest that you're already limited by the room and no PJ upgrade will be able to improve anything other than the absolute black level for fade to black for example: Anything with light parts in it will be washing out the dark parts judging by my viewing last night.

If you can't afford the room just now, see if you can get away with removable black cloth and some small hooks or similar...you'll feel like you just upgraded to the latest PJ. ;)