I just finished setting up our home theater in a room 10' x 10'. I am projecting a 92" image. My projector is actually hanging in the closet of the room in order to give me enough throw room. I could have gone a bit bigger with the image but I already had the screen (High Power) and projector from our previous place. We have two seats in the room. I prefer to call the room our "screening room" rather than a "home theater"
Is it acoustically ideal? No, but at the moment I am running computer speakers through my home theater pc, so it doesn't matter much. Does it give us a great "movie" experience? You bet.
Only you can decide what is acceptable for you, but I say go for it!
P.S. You might want to look through this thread
http://www.avsforum.com/avs-vb/showthread.php?t=996973

Is it acoustically ideal? No, but at the moment I am running computer speakers through my home theater pc, so it doesn't matter much. Does it give us a great "movie" experience? You bet.
Only you can decide what is acceptable for you, but I say go for it!
P.S. You might want to look through this thread
http://www.avsforum.com/avs-vb/showthread.php?t=996973