Natalie:
If you have VERY good light control in this room (you can make it almost totally dark during the times you'd want to use it), a front projector (DLP or LCD) is the way to go. Infocus and others make very very good projectors in the sub $5000 range. Again, check projectorcentral for...
I’d check out the following:
PSB Image (Package Include Image (2) 5T, (2) 2B, (1) 9C, and Subsonic 6 Subwoofer - $1729
With speakers in that price range, I personally would look at the Yamaha, Outlaw, or Denon receivers in the $500-$600 range.
Also, don’t rule out Norh speakers...
I have a Toshiba TN55X81 (4:3) which doesn’t have a factory 16:9 squeeze. Since this TV automatically stretches (vertically) any 1080i signal, I opted to perform the manual squeeze through the service menu. Though I was pretty successful (only slight geometry “issues” in the corners of the...