"a 1024x 768 projector will display widescreen images as 1024x576 with black bars on top and bottom"
For sub 500 you should be able to get a home cinema native widescreen projector. I would recommend you do that. If you are still considering XGA read on.
If you live in Europe PAL widescreen is 1024x576 for pixel to pixel mapping of anomorphic dvds. A XGA projector will have alot less screendoor effect than an SVGA projector. With the same screen width it will produce a larger 4:3 image than a native 16:9 projector if you watch alot of 4:3 stuff. The XGA projector will probably be brighter than a home cinema projector enabling viewing in ambient light, or using a low gain greyscreen to reduce unwanted room reflections from light colored walls washing out the picture. XGA projectors can be had very cheap second hand in comparison to home cinema projectors.
However XGA projectors are designed for business presentations not home theater. They are designed for brightness with acceptable picture quality, rather than for best picture quality with acceptable brightness. With DLP projectors there is a trade off.
Trade off between noise and brightness, the brighter the lamp generally the hotter it runs and the louder the cooling fan.
Trade off between color accuracy and brightness. A colorwheel designed for D65 color accuracy has a large red segment and small green segment to compensate for the lamp being excessive in green and deficient in red, this lets through less light as it can only eliminate the excess. They may also use a yellow segment to improve light efficiency by up to 50% and enabling them to use more saturated green and red segments, possibly a cyan segment for a little bit more light efficiency and a magenta segment if going for a complete use of the brilliant color processing, finally maybe a ND green segment to increase bit depth for shadow detail needed because of their high colorwheel speed. These enlarged or extra segments give a more accurate greyscale color temperature and more accurate color primaries for better color reproduction.
A colorwheel designed for brightness uses a white(clear) segment to boost brightness at the expense of color saturation in bright colors and possibly causing visible picture noise - dithering in mid to high tones where the white segment is starting to be used. To stop the extra brightness washing out yellow, they tend to use a greenish yellow or use a yellow segment as well. They tend to produce excessive green light, with a cyanish white or with a yellow segment a greenish white since they use it to boost brightness as well. To produce a more accurate greyscale color temperature you can reduce green and blue down to the level of red, either by using the projectors color temperature controls or a color correction filter. To prevent bright white desaturating bright colors you can set brilliant color - the white segment to off. Reducing the green and blue down to the level of red (not using a color correction filter) and not using the white segment both reduce the max white brightness and so the claimed contrast ratio of the projector.
Trade off between contrast and brightness. When the dlp is off it reflects the unwanted light off at an angle, this light then bounces around the light box. When the dlp is on it reflects the desired light into the iris. The smaller the internal iris of a dlp projector the more it descriminates against the unwanted light scattered in the light box and infavor of the desired light. The bigger the iris the more light it lets through so the brighter the blacks and whites, less contrast more brightness.
Another possible drawback of business presentation over home cinema projectors is the colorwheel speed and DLP Rainbow Effect.
Colorwheel speed is usually slower in business presentation projectors, they are used in rooms with ambient lighting so their relative brightness and contrast is reduced by the viewing environment, and are often used to view static images - spreadsheets, pie graphs etc. This reduces the chance of dlp rainbow effect. In a home cinema environment the business presentation projector will probably be too bright and with a slow color wheel may induce dlp rainbows, this mght be solved by using a ND filter to reduce brightness.
A home cinema projector usually has a faster color wheel to reduce the risk of dlp rainbow effect, as you are expected to view it in a darkroom and the projector has a high contrast ratio.
Personally I use and am very happy with 2nd hand dlp XGA projectors, I got them because they were very cheap. The main thing likely to make an xga projector unuseable in a home cinema will be dlp rainbow effect if you suffer from it.
