Bjoern,
On your setup, I have no doubt that what you're saying is true. Sean's rig is just a 24" 16:10 CRT, so its not going to be that much more revealing than my 17" CRT, at least not relative to the difference between my monitor and your 9' screen. I can definitely see the difference, and I know that most folks around here are always looking for that last bit. On my setup, though, the results are marginal at best (and I'm the guy who can see all the noise in the picture while using DScaler). When I'm examining for PQ, I was easily able to determine that while the transcoder's image was slightly softer, that resulted in an image that "felt" more solid than the DScaler image, and I did very much like that quality. Projected like in your HT, I can see how the difference between the two would be magnified and thus the difference very obvious, and obviously worth the extra $$$ and effort.
All I had to test it with were the GC games Wave Race and Smash Brothers DX (JPN of course; SB DX has just come out the week previous in Japan). Wave Race looked phenomenal. The water was so transparent, but obviously present. Smash Brothers, however, did not seem to benefit as much (the switch to progressive is buried in its options menu, kinda like Rogue Squadron). I would love to have gotten it to work on my US games. I could have A/Bed Crazy Taxi on both the GC and the DC in 480p (over DScaler, the GC has an obvious edge in video output using screen grabs of identical shots from both versions). If I didn't have to return it so quickly, I might have been able to A/B Sonic Adventure 2 as well between the two consoles.
The end difference was noticeable to me, and I dearly wanted to throw more money at the problem so I could keep the transcoder, but when it all comes down to playing the games, I couldn't see the difference then. I mean what's the point of playing if all you're going to do is narrow your focus off the playing part and watch the pixels with a critical eye? On a big projection setup like yours, I'm sure the problems with my method would be glaring and make playing difficult or even completely unenjoyable (like when my old WinTV FM developed those evenly space colums of visual noise; I tried everything I could to fix them myself and once I failed, immediately went out and bought my IOMagic PC PVR card; I just couldn't play like that), but on a relatively small CRT, the difference wasn't great enough to justify with that kind of money. The $400-$500 I recovered by returning the transcoder and selling off my KVM gear has purchased an aweful lot of software (more games, DVDs, etc.) over the intervening months, and that's where the real deal is, IMHO.
Of course, I would likely be wide eyed and slack jawed the entire time if I were invited to come play in your pool. Maybe if I win the lottery or write a best-seller I'll upgrade to something more like that. Until then, I'm pretty much stuck muddling by as best I can with bargain basement components (my entire audio setup is either free or cannibalized from cheap PC audio parts, just for one example), which accoring to my friends and family has netted quite good results (must mean I'm the only one around here that's obsessed with quality, eh?).
Anyway, no offense taken. Sean needed to hear an opinion from the opposite end of the spectrum. One of these days, I need to find someone with a real HT that'll let me play with all the toys myself =-p
Kensai