I guess I approached this as a living space first and a theater second. So its painted more like a living room than a theater. The paint and carpet are a couple shades darker then what is in the rest of our house.
I don't notice any problem with "reflections" (such as light from the screen reflecting off the ceiling back onto the screen -- is that what you mean?). But direct lights certainly wash out the screen. Those flourescents over the ping pong table really wash out the screen and should be off while viewing anything. The sconces on the back wall can be on for TV such as football but they're better off for movies. I prefer the overhead can lights on but mostly dimmed.
My wife gets credit for the seating. In fact this is an idea worth sharing. Apparently for theater seating, the arms are sold seperately from the chairs. And the arms (and chairs) are expensive (I forget how much but I remember I was surprised at how much an arm goes for). Well my wife went to the warehouse/outlet store for a large furniture store (It may have been Sofa Express). This is where they have all the scratch and dent and mismatched pieces. She scoured the store and found 4 arms that went together (not exact matches but close enough). And since they were in the warehouse as scratched or missmatched they were priced really low (maybe 80% off). Then she ordered 3 chairs at regular price. So the chairs were still expensive but the total package was easier to swallow because of the huge discount she scored on the arms. Also, the arms are leather or faux leather so they're easy to wipe off any slop from your drink. But the chairs are that micro-fiber material and are really soft. The overall two-tone look turned out awesome and I'm not sure she would have thought to do it that way if she had ordered everything rather than finding the arms in the warehouse.
-- Kevin