Was the light output spec'ed so that a child peering into the lens would not have his eyesight damaged? Yes, a big constraint on light output.
At 234 pixel vertical resolution it would not need a good de-interlacer.
Does it actually use a single panel LCD such as in a digital camera viewfinder, with side by side red, green, and blue pixels?
A few years ago I was given an LCD projector with exterior shape like a loaf of bread. It had a single panel with side by side pixels arranged similarly to phosphor dot triads on a direct view CRT. It was approximately 640x480 with about 215 of each color pixel on each row. It gave a definitely pixellated picture due to the low fill ratio aka pronounced non-rectangular grid screen door effect. I sold it on eBay for a coupl'a hundred dollars.
Remember when lines and logos burned the TV screen? I was at a concert where a musical selection made extremely heavy use of about four of the keys of the piano.