It's interesting that some people exclude the X1 because of the 4:3 ratio. It was an issue with me as I thought a low end PJ couldn't handle regular TV stuff. That was until I got my X1. I have a load of VHS and Beta videos that I am now watching on my X1 with great effect. I would have missed out on a lot of great stuff if I'd gone with 16:9. Remember rear projection TV are very fixed and bulky so choosing one of these has different parameters. With front projection and a 4:3 screen you can easily mask to achieve any format. Most movies are 1.85 or 2.35 so even with a 16:9 projector you'll still get black bars top and bottom. With a 16:9 projector you'll get black bars on the sides when you watch 4:3.
Concerning rainbows: yes, some people are sensitive to them. Thankfully I'm not and so far neither has anyone else that's seen my X1. Also don't confuse headaches and fatigue with rainbows. It seams that the headache and fatigue problems have more to do with motion artifacts. The Plus Piano has this issue but the X1 does not, for me, or any other poster that I've read who has one. I couldn't watch the Piano for much more that 30 minutes especially if there was a lot of movement on the screen. I watched my X1 last night for over 5 hours with absolutely no ill effects. I encourage you to view all the projectors your considering for yourself to see if there are any problems.
Some people are LCD guys but for me you can't beat DLP for contrast and overall image quality. As far as 2x or 3x colour wheel situation is concerned, all things being equal, the higher speed the colour wheel is the better. However, the scaler/deinterlacer is also very important and the X1 has one of the best in the Faroudja 2200. It's this that makes the image so sharp and smooth with no motion artifacts. S-video cabling is just fine, making hookup easy and economical and as _dl_ pointed out you don't need a progressive scan DVD player. You'd be hard pressed to find a DVD player that can outperform the X1. Even VHS video hooked up with a composite cable is great!
Check it out, if rainbows bother you stick with LCD if not you'll be very happy with the X1.