Mitsubishi HC3 - Image Quality
Overview
Layout
Image Quality
General Performance
Warranty
Setup
Summary, Pros, Cons
Pixelization, the Screendoor Effect
As a relatively low resolution, HT LCD projector (there are lower resolution WVGA LCD models, like Epson's Home 10+), pixels are fairly large and visible. Since LCD pixels are more visible than those of a DLP projector, you will see them at a slightly greater distance than you would on a DLP projector like BenQ's PE5120 (WVGA). It helps that the HC-3 is slightly higher resolution.
What of it? If you are completely pixel adverse - you don't want to see them at all, you are going to have to sit back a distance about twice that of the screen width. So if you have a large, 100" diagonal 16:9 screen, that measures out to 87" wide. Twice that is 174" or 14.5 feet.
However, again consider what you are watching. Many will find that they are happy overall a bit closer to that, say 11-12 feet for that sized projector screen, and sports fans might be happy even closer.
Color handling
One really great thing about LCD based projectors are vibrant colors. The HC-3 does color well. Of course there are a wealth of settings,
for video, standard, dynamic... There is also color temperature control, lamp brightness, and user savable settings, so you've got a near inifinite number of color settings.
But let's cut to the chase. I watched some March madness basketball and was dazzled by the bright reds and fully saturated yellows of uniforms. Everything was "jump off the screen" vivid. Fleshtones were also very good (depending on the choice of settings, of course). Leno looked great in Hi-def too.
Most importantly I was able to fully enjoy the watching TV and sports with a pair of lights turned on in the room. We're not talking sunshine pouring in windows, but I am talking about more than enough light to wipe out all the dark areas in any movie regarless of the HT projector. Also to the point that's more than enough light to comfortably entertain, which I think is the real strength of the this home theater projector. 
One more thing, I did set up the HC3 projector next to a BenQ PE5120 on the custom screen you may have seen pictures of in some of my reviews - it is 48" high and 206" wide - more than enough to project two widescreen images side by side.
The HC3 had enough extra brightness and dynamics, that with a small but significant amount of ambient light, the HC-3 actually did better in terms dark area detail, despite the lower contrast. This was because the ambient light was more than enough to wipe out any details that the 5120 would normally reveal in dark areas, that the HC3 could not. And because the HC3 is the brighter projector, it held up better overall. Remember though, in a dark room, the BenQ does much better on those shadow details.
Switching to movies, I started with Lord of the Rings (LOTR) - Return of the King. Now one thing about LOTR, is that there are plenty of dark scenes.
This is where the HC-3 comes up a bit short in terms of details in shadow areas. A few less stars are visible in night scenes, and sometimes details in dark cloaks or the background are missing, as the HC-3 cannot get as close to producing blacks as higher contrast DLP projectors. Other entry level projectors that are DLP powered, may not be near as bright, but have the much higher (1500:1, 2000:1) contrast ratios, and do better "black levels". Below is an scene from Bulletproof Monk. In the foreground our hero has his back to us, and he's wearing a leather jacket. I have artifically boosted brightness so that you can see that there is no shadow detail there. Other projectors do find some detail, but again, movie watchers watch movies, and don't spend their time looking for shadow detail. Below that is another scene from the same room, and you can definitely understand that there is plenty of detail overall, in dark areas, under the table, the couch, etc. 
The real question, how much of a problem is this? That depends. If you are a movie purist and want the best overall image for watching both light and dark scenes, then you will probably be happier with a DLP projector, like the BenQ 5120, Optoma H31, Infocus Screenplay 4805. (all are slightly more expensive).
But, if TV and sports watching are your first love, and movie watching is fine too, but not your primary reason for buying a projector, then, for you, this is probably the best projector anywhere near the $1000 price point.
I moved through several other movies, including Bulletproof Monk, which has lots of
dark scenes, and also a lot of high contrast scenes with a mix of both very dark and very bright. With the limitation of the HC-3 on black levels and shadow detail, expected, the overall viewing sensation
was still very good. This projector may lose more shadow detail than the others, but it does handle the overall blend of darks and brights - very well - in no small part due to the saturation advantage of LCD over DLP.
So overall the HC3 does a more than acceptable job on movies (remember it has rich dynamic colors), but if you are "movies first", you should at least check out the competition. If you are sports, TV focused, I think you've found your match.
Screen recommendations
Due to the low contrast, if you are concerned about dark levels, you may want to choose a grey surface screen (Stewart Greyhawk, Da-lite HC Da-Mat, etc.) Of course these high contrast surface screns, which do enhance the image, are expensive. This will darken those dark grays bringing them closer to the desired black, and they will also reject some ambient light from the sides. For TV and sports fans, a standard matte surface should be fine.
Overview
Layout
Image Quality
General Performance
Warranty
Setup
Summary, Pros, Cons