Here is the issue. The room is only 6.5 feet high at the peak so a projector just does not make sense hanging therefore it would have to be installed on a coffee table. This would push the couch back to at least 10.5 feet. The rear-projection TV would make it a lot easier to install and run wires but would not give us as big as screen. We plan on using it just for movies and high-def so the picture quality is not a problem sitting that close, we want that big screen movie theater experience.
Take a look at the pictures and let me know what I should do. I have a construction page up at AVSForum if you want to follow along with the construction. Thanks for the advice guys!