1. I would consider designing your room with a rectangular shape. Square rooms can be a difficult environment for sound reproduction and if you want a 110-inch screen I would incorporate a “throw distance” (the distance of the projector from the screen) of about 15 feet for your projector to achieve an image of that size. As for the amount of channels, it’s my personal opinion that 7.1 isn’t really necessary, but perhaps you could look at a 5.2 system. If your budget permits you can certainly look at 7.2. I’m suggesting 7.2 to help balance the reproduction of low frequencies (bass) with impact and smoothness. Too many home theaters lack true bass and the bass that is produced is distorted due to room acoustics. Having a rectangular shape and a pair of subs are things that can contribute to smooth bass reproduction.
Another thing to consider with your room since you are looking at projection—-good choice by the way—-look into a way to manage the room’s lighting. Light control can be as simple as putting shades on the window and purchasing an IR controllable dimmer from a company like Lutron. Not only will this $40 item help to control the ambient light to help maintain picture quality, it will help to manage your energy consumption too. Also try to locate the room’s lighting by the seating area so any usage is away from the screen.
2. The ceiling can be an issue because small-room acoustics dictate that sound reflects off the walls, floor and ceiling. If possible stay away from a pitched type of ceiling design. Addressing room acoustics try to use some soft materials in the room such as carpeting, furniture with cushions and curtains or drapes. If room design is important to you speak to a professional like Anthony Grimani of PMI, Gerry Lemay of Quest Acoustical Interiors or Richard Bird from Rives Audio. They are top professionals that offer a variety of services.
3. For your budget there’s a lot to consider including projectors from JVC, Runco, Epson, Panasonic, Sony and Digital Projection; screens from Screen Innovations (SI), Vutec, Stewart Filmscreen, Elite Screens and Draper; A/V receivers and Blu-ray players from Anthem, Denon, Marantz, Integra, NAD, and speakers from PSB, Paradigm, Focal, B&W and others.
If you want consultation from a professional Electronic House offers a listing of installers by state