Endless topic around here. Ultimately it boils down to taste, but there are physical parameters one can talk about.
Let's assume your eyesight is normal.
Then the next factor is what kind of signal you're watching. With SD (standard definition, or old-style) you should be sitting approximately 2.5 times away than the diagonal size of your TV. With a TV bigger than that you may see signal noise. Note that the distance is measured from eyes to screen.
This is made more complicated by the fact that some SD images have black bars top and sides so are smaller, but it gives a rough guide.
With good HD input you can easily sit twice the screen diameter from the TV and should see a clear picture. Some people around here will tell you they sit closer than that, up to 1.5 times the screen diameter. Personally I wouldn't want to do that unless I had a really good Blu-ray but everyone is entitled to their preference.
As to the choice of a projector, that depends on a lot of factors such as room lighting, size of audience, height of ceiling. Many people including me feel that it won't work in the living room, but if you can afford a high-end home theatre room, that's a different matter.
Projectors must be used in a dark room. Most living rooms have poor light control and are being used for other things besides watching TV. Projectors still aren't ready for primetime as the primary TV in most households.
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