To answer some questions here...
1. The projector can be placed anywhere in the room - from floor to ceiling - without any issue related to 'splash'. This actually only occurs when light bleeds out of the casework of the projector and typically indicates some flaw in projector design. So, generally, hugging the ceiling is fine.
2. You SHOULD place a projector at least a couple of inches from the ceiling, or more, to help with air flow around the projector.
3. You MUST put the projector at the point where it is required by manufacturers. With DLP projectors, that can be about 30% above the top of the screen (if the screen is 50" tall, then 30% of 50" = 15" above the top of the screen!) - DLP can have some serious limitations due to this fixed lens offset on many models. Better, are the DLP models with lens shift (typically more $$$) or the LCD projectors with lens shift. Lens shift gives you a range of area where the projector can be placed. Kind of like zoom on a camera allows you to be closer or further away, lens shift lets you raise the projector up and down while still having a perfect image.
4. Do NOT use keystone correction! Keystone correction is a digital correction which people confuse with lens shift. While lens shift is an optical correction and maintains perfect image quality (with good optics), keystone correction actually must lower projector resolution to perform. If you bought a 720p projector, the second you use digital keystone correction you are no longer using a full 720p projector.
5. The projector itself must be placed within the zoom range from the screen. This range is entirely dependent on the individual projector and the screen size.
6. Pick a screen size FIRST, this should be based upon your expected seating distance. THX (movie theater) standards put the center seats of a theater about 1.5x the screen width. So, if you are seated 12 feet from the screen, you want about a 96" wide screen or about a 110" diagonal screen (1.78:1 screen ratio).
7. With a 110" diagonal screen, go to Projector Central (dot com!) and pick out a few projectors you are interested in and use their projector calculator tool. For 110" diagonal, most projectors will fall in the range listed above - about 12-15' from the LENS to the screen.
8. Some projectors, such as the very popular AX200U from Panasonic, have a LOT of zoom range and you can put the projector 11-22 feet from a 110" diagonal screen. Other projectors, like the cheaper 720p DLP models, only allow you to put the projector about 12 to 13 feet from the same screen. So, having a good idea of your projector is good to have before you buy.
9. If at all possible: RUN CONDUIT! Or leave some other access between the projector location and the equipment location. I typically use an extension cord and plug it into my surge supressor with my other equipment and then run my cabling. This way I have my projector surge protected, and on the same circuit as my other gear. With the conduit or retrofit access, I can always put the cabling exactly where I want it. But, when I do an installation, I always find the projector FIRST, then put it where it needs to go for the screen that will be used.