Use the split and merge method you describe, but use switch boxes rather than Y connectors. Otherwise impedances will get messed up and you could have ghosts or picture quality loss. You will have to reach up with a stick to select the video connection at the projector, if the switch box is not remote controlled.
Video hints:
http://members.aol.com/ajaynejr/video.htm
Ground loop problems (typically showing up as lines drifting across the screen) may occur if some of the cable plug outer shells are oxidized, but any ground loop problem is just as likely to be there with the existing component video connections as with stringing a composite cable along the ceiling or sharing a cable.
How is the de-interlacing in the projector. If not superb such as with a Faroudja DCDi chip, you might want to get an external de-interlacer to put next to the receiver for LD player and VCR and ordijnary broadcasts. Most of the popular ones output component video (the others ouput only RGB). An original iScan (about USD 200. on eBay) does a surprisingly good job except it does not zoom letterboxed LD pictures from pillarbox to near-full-16:9-screen.