good work on your decision.
I wouldn't call it 'hype' as much as different expectations and needs. if you had that projector and a great home theatre projector side by side in a light controlled, blacked out room, the difference would be clear.
however at the same time, those two projectors in a dusk-lit backyard on a monster screen would probably be the opposite. the home theatre projector could be so dark you can't even see it!
I would also agree with your screen observation. in fact, in a lot of ways a bedsheet can be better than a cheap screen. I've got way more texture and 'sparklies' on my cheap electric screen than I had with a bedsheet. plus the bedsheet was 'acoustically transparent' haha. but it didn't roll up out of the way at the touch of a button, so... either way, I feel you either need to really up the quality of the projector and room(so that texture or hotspotting is more noticeable than pixel structure), or be trying to hide serious flaws(high gains etc) to justify an expensive screen. for example, my old projector looked mint on my cheap screen. my new projector shows all the flaws of my screen.
I would caution you not to go too cheap. money isn't always spent on performance. the reliability, build quality, install flexibility(lens shift, zoom, etc), and warranty also contribute to the price of a projector.
Displays: Samsung PN64F8500/JVC X35
AVR: Pioneer VSX-1130K, 7.1/5.1.2 audio
Sources: HTPC(Enby), PS3, XBOX360, Wii
Control: Harmony One