I have mine (2010 mac mini server edtion) in use as an HTPC connected to an InFocus In78 DLP projector (720p) to a 92" screen scape.
Works perfectly, with Safari, Plex, VLC, Itunes and all. No problems viewing anything on screen. I control the mini it mostly with a magic touchpad and the Apple wireless keybaord, occasionaly with VNC viewer on my iphone.
No am am not writing articles or developing spreadsheets on this setup. I cant imagine anyone would do that with a projector anyway - would be crazy o look down at a keyboard to type then up to a screen that high up. Just not a relevant use case. But for HTPC usage, you wont have any ergonomic problems at all.
Remember that you can customixe icon and font sizes in the operating system, so you can make the viewing experience anything you want to. I did that and it all works great
Also was able to use the OS to tailor the display output to match color, contrast etc.
Dont hesitate, I would say. Go for 1080p projector - why not? It's only gonna be even sharper and better than an already good 720p experience.