I use a 720p projector currently with no issues that I can see, no tearing. I have a Mitsubishi HC1500. I think 720p looks just fine but the price of 1080p projectors has come down to about $1000. The specs on that Sony look really nice.
With lower end projectors you should be aware of a few things. Check the lens info and throw information to make sure your image will be the correct size (ProjectorCentral.com has a great tool to help with this). Most low end units do not have lens shift so projector placement is more restricted. I would also make sure it has all the inputs you will need. I recommend using the eco lamp mode to extend the lamp life. Bulbs can get up to $300-$400. I have reset the clock on mine once already and it still looks great, YMMV.
The biggest things to be aware of are room setup and light control. A bright room can really degrade the picture depending on the brightness of the projector. I have very heavy curtains for my living room for daytime viewing. You may also want to think about were you will put the projector and devices and how long your cable runs will be.
A good screen is also high on my list of things to look at. I used a home made screen for a while and it worked ok. After I bought a Da-light screen the picture looked way better. Screens can range from a few hundred to thousands depending on mount, screen type, and size. I have a manual pull down (like you see in classrooms) that actually only ever went up when I moved. I got that because it was the cheapest style of mount. You can spend a lot more on permanent install or motorized screens. Da-Light, Draper, et all have a wide variety of screen material for various kinds of applications. For example, I use a High Power screen because it helps increase the brightness of the image, however it reduces the viewing angle and is not good for ceiling mounted situations. I would look into what screen would work best in your setup.
