It "supports" higher resolutions, but will not give you more pixels than native. I think 1080p is worth it (we have a 32" 32A550 Samsung in our bedroom - I see lots of places sell refurbished ones for < $600. It doesn't do 120Hz, though.).

If you go with a projector, check out the cost of the bulbs. They're usually not cheap. Consider the power requirements too - bulbs can get really hot.

B&H's cheapest 1080p projector is $1k. They have a Sanyo 120Hz 1080p projector for $2400. (I haven't looked at them in detail.)

I think if you want to minimize costs but want 120Hz you'll have to with an LCD. There are several 1080p 120Hz LED backlit sets for around $1k.

HTH a little. Good luck.

Cheers,
Scott.