I made myself a giant movie screen, which takes up a good quarter of my studio apartment. Right now its size over quality, but the experience is quite immersive.
To start out you need an LCD projection panel. This can be had buy the shrewd ebay buyer for around $50. You'll want to get one that can handle millions of colors and have a refresh rate fast enough to allow video images to move smoothly. There are charts available online that list the panel models and capabilites for your reference.
I went with a proxima panel. It works pretty well, but the power supply has some issues and occasionally the whole thing starts flickering crazily, but this hasn't happened after a movie has started yet. Also it came withe some dead pixels. When you're blowing a 640x480 image up to 100 inches, these can show as big light blotches, but I'm already used to them. The other problem with this panel is it seems to be quite dark, and offers no brightness control.
The next thing you need is an overhead projector. The brighter projector you can get, the better, as the panel requires lots of light. This may not be an option though. I'm thinking of rigging my projector to use two lamps at once, but this could be a fire hazzard.
My overhead projector also came from ebay, and ended up costing the same as the panel. Many people can find these used locally, but I had no such luck. I wish I had because shipping these things is expensive, and it came in all sorts of disarray. Some packing tape and jury rigger and, pow, it projects light clearly, sort of.
The last thing you need is a screen. Screens can be purchased commercially, or you can make one yourself. I went to the clearance section of my local fabric store and shined the various white fabrics with a flashlight. I chose the cheapest one that reflected back the most light. I planned on making a wooden frame for it, but ended up suspending it with string at the corners to my wall. It makes for much smaller storage and easy removal. This is good when something takes up so much space.
When all is said and done, it's quite an experience. I'm currently having lots of trouble getting the darker pictures clear, and whites aren't coming out pure white. Also text isn't sharp. Overall though, it's a good project. I may try a new projector or something to tighten things up a bit.