The biggest problems with LCDs are motion blur and crappy black levels that'll drive you nuts in the evening with the lights down low. Both are significantly better in the new Sony XBR4/5 and Samsung '71 LCDs but then those are like $3k+ for a 40"+ set. If you buy a cheap LCD you're going to step back a couple of years in technology and IMHO LCDs from a couple of years ago aren't really all that great for television.
By "projection" I mean "rear projection" not "projector and screen". The only practical difference between a DLP/LCD/LCOS rear projection set and and LCD is that the LCD might be 4-5" thick while the projection set might be 14-16" thick. A few people but not many (I'm one unfortunatley) see slightly whitish or rainbow artifacts near the center of rear projection TVs. They're not nearly as annoying as the blurred motion and crappy blacks of 2-3 year old LCD flatscreen technology though and odds are you won't see 'em anyway. Check out a few in shops and see if you can pick out the slight color variation near the middle of the screen, if not you'll get a far better set for far less money with rear projection versus LCD flatscreen.
12' is a pretty good sized room if the couch is on one wall with the television opposite. Check out
this viewing distance calculator to get an idea of what you need.
And beware comparing sets in the store. They're typically all set with the contrast and brightness cranked waaaay up to compensate for store lighting which is several times as bright as typical home viewing conditions. Better to look for smooth motion, lack of artifacts, lack of digital noise, picture sharpness and the like and rely on the reviews for color accuracy and the like.
