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My room is fairly small (12x16) and I carpeted the lower half of the walls with indoor/outdoor carpet from Home Depot. It turned out great and really helped to deaden the room acoustically. The couches also seem to absorb lots of sound.
The Sanyo may work, you'll need something with a pretty short throw if you want to get a 92" screen in there. I was looking seriously at the Z2, but decided on the SP4805 instead. If I were you, I would also consider the Z3 and the Panasonic 700U as well. The 700U is suppose to have some smooth screen technology that allows lets you sit closer to a large screen without losing picture quality. This is especially great for smaller rooms. I will consider something like it when I upgrade projectors in a few years.
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