Front projection setups, no matter the cost, will most likely never reach the levels of contrast achieved by LCD/Plasma/ even in the dark. It is very hard for a projection setup to achieve both brilliant whites and inky blacks in the same frame. So by comparison, the ultra-contrasty LED TV's out nowadays will of course look a bit "better" compared to a front projection setup, especially for still images (photos).
With that said, front projection setups have come a long way since 2002. Contrast continues to rise, as does lumens, resolution, and video processing. With the right setup, a front projection setup can come close to the image quality of a plasma in a dark room.
With a bit of ambient light in the room, however, a front projection setup will always look inferior to a plasma/LCD television. Even with ambient light rejection screens, there will always be a bit of wash out. Most ambient-light rejection screens also introduce artifacts into the image due to their high-gain material. So if image quality in all situations is your absolute most important feature, then I don't think a front projection setup is right for you.
I will say though, having such a large screen allows you to resolve the detail in high megapixel photos. Even at 1080p (which is a low res compared to today's cameras), you cannot resolve all of the detail with a 63" screen unless you're sitting about 3 feet away. The much larger image not only makes it more immersive, but brings out the detail in 1080p that usually goes unseen with traditional TV's.
Since you did mention narrow-beam task lighting, I do think you could go with a setup that produced very good results even in task-oriented ambient light. Even with a very costly projector and screen, you will still stay under the budget for a > 80" traditional TV.
So yes, you can achieve great picture quality with front projection setups that rival plasma and LCD TV's, but you do have to control the environment to do so. However, the payoff will be a much more immersive and detailed image.
My Home Theater
Screen: DNP Supernova BLADE (08-85)
Projector: Espon 8350
Receiver: Yamaha RX-671
Speakers: DefTech 8060-ST