PC scaling and video quality

So I've done my due diligence, and spent about 3 hours on Google trying to understand the ins and outs of down/upscaling. While I get the concepts, I still don't have any *answers* (although I get the impression the "answer" may be subjective).

I recently set up a projector with a native resolution of 1280x800 (WXGA). This is obviously non-standard for HD video playback. It works great with my 360's HDMI output, but I can't figure out what resolution I should set on my PC's RGB output. I plan on using my PC to playback DVDs, BluRay, and the occasional PC game.

The projector has a throw distance of about 15', yielding a viewing screen of about 100". We will be sitting about 10'-12' from the screen. With those numbers in mind:

1. Should I set my PC to the highest resolution allowed, 1600x1200, and let the projector handle the scaling? When I do this, the projector shows a message that says "Looks best at 1280x800". It seems like if I go this route, and play back a 1920x1080 video, the image is scaled twice (PC and projector).

2. If I backup my BluRays to my PC, is there any point to ripping them full size? Or should I just compress them to 1280x720 or 1920x1080 MKVs to save space? If the projector's native res is 1280x800, I'm kind of stuck it seems.

3. Finally, your opinion: is it better to upscale slightly (1280x720), or downscale significantly (1920x1080)? Should the PC do this, or should I leave it up to the projector? I use MPC-HC for playback, and they seem to have significant scaling options.

Thanks for your help!

if I understand right, you're thinking that not only will a 1280x720p file save disk space, but it will have a better quality as it doesn't need to be scaled?

I don't think my projector has such a setting (screen), but I'll check it out!