You know, this whole issue boils down to viewing distance to screen. The best example of this for me is my 1080p 24" LCD computer monitor (I have both a 22" inch at 1600 X 1050 and the 24" at 1920X1080 - I am and have been for five years now a dual monitor junkie).
Anyway, the great thing about LCD monitors, especially those with anti-glare coating is that you can sit VERY close without any eye-strain. I find now that the most impressive movie experience in my house is sitting about 2 feet away from my 24" 1080p monitor and watching Blue-ray films. Both my wife and I agree it is EXACTLY like the big screen experience. Our 42" HDTV (not 1080p, bought 4 years ago) looks fantastic displaying HD content such as HD cable stations, Blue-ray discs, or even progressive scan conventional DVD's. But we sit about 12 feet away so for us a 42" 1080p would not seem like an improvement, we would need a larger screen.
You know, this is off the subject a bit but for most people I know like my wife, friends and family, they are STILL impressed at 1080i or 720p resolution. Blue-Ray is not taking off like DVD manufaturerers and studios had hoped, and the reason seems pretty clear to me: why introduce an improvement to a standard that people already think is very good? It's like they are trying to fill a need THAT DOES NOT EXIST. Now when de-rigor screen sizes become 70" and bigger (and of course they eventually will), THEN we can talk about the merrits of Blue-Ray. But until then, I really think they jumped the gun on this.
Again, I DO enjoy Blue-Ray on my 1080p 24" computer monitor sitting 2 feet away. But I'm not typical. Most people don't sit that close to their monitor. And most people don't sit six feet away from their 50" LCD 1080p TV. But the day will come. Like I said, there are STILL many, many folks in this country who are only NOW upgrading to a HDTV (1080i or 720p). To them, the differences compared to their "old-fashion" TV are DRAMATIC. The next step to them is a need that does not yet need to be filled.
In my opinion, it boils down to what you consider the "big screen experience". I have a 28" 1080p monitor hooked up to my primary system and that works great for viewing HD video clips, but sitting there, hunched over my computer desk for a couple of hours does not satisfy one of my requirements for the big screen experience: comfort. It may be visually immersing like the big screen experience, but it sure doesn't feel like one.
My home theater PC is connected to my 32" HDTV and I agree that it doesn't compare, visually, to sitting so close to my 28" monitor, but it's a far cry better than when I was a kid; sitting 15 feet away from a 19" TV. It works for the usual TV viewing and the occasional movie and it's a lot more comfortable than sitting in front of the monitor for a couple of hours. It doesn't, however, give that sense of immersion that sitting so close to a computer monitor can give.
Now I am a big movie buff. To me, that "big screen experience" (comfort and immersion) only comes in a movie theater like setting. This is why the second output of my HTPC is connected to my projector. One of the reasons I chose the apartment I currently live in is because of the depth of the living room (28 feet). With that much room, my projector gives me an 11' (132") diagonal. Black out curtains control the lighting and a TOSLink optical connection to my receiver gives me surround sound.
It's not perfect though. From my viewing seat (still a lot more comfortable that my desk chair) about 18 feet away from the screen, it's very much like sitting in the back row of a movie theater (of course, it's also like having the entire theater to myself). If I move closer to the screen, it's more like sitting in the middle of the theater, but the closer I get, the more noticeable the "screen door" effect becomes. This is, in part, due to the fact that my projector is not HD capable (1280x768 non-hd). If my projector were HD capable at a resolution of 1920x1080, then the screen door effect becomes much less noticeable at a closer seating location and I could move "to the middle of the theater". At $1000 for an entry level 1080p projector, though, it will have to wait and until then, Blu-Ray will have to wait as well.
It's not so different from when DVDs were first introduced. Back then, people mostly thought, why bother with DVDs when the VHS Tape collection works just fine? DVDs were introduced 15 years ago, but if you go back only a few years, you could still find VHS tapes at most movie stores. Ten years from now, you'll probably still be able to find DVDs in most movie stores.
One problem with sitting 2 ft. away from your monitor is that, if you sneeze, you're likely to get boogers all over your screen .
Seriously, I have a 50" 1080P plasma and for gaming, I sit about 4 ft away so it would be equivalent to a screen half the size (25") placed 2 ft away. Of course, plasmas tend to give off some infrared radiation so you don't wanna be sitting any closer than that during the summer . And I do have a very comfortable office chair to sit in at the desk, plus a 27" LCD for actual type work (much more rare than my wife would like ), or web browsing, etc. Also my mother-in-law has cataracts & can barely see the pix my wife's family emails every so often, so I often use the plasma as a second monitor when checking my wife's Yahoo email account, so that her mom can get about 3 ft. away and see the pictures.
However for watching HD movies, I prefer to relax by sitting on the sofa that is some 14 ft. away at one wall of my "office" (more like game room but that's what my wife calls it - sounds more impressive to her friends I guess ). That's the position I have set up the 7.1 surround sound system for. Watching a movie from 4 ft away is more like the 6-story Imax screen experience, and while impressive for a short while, I like sitting further away for the long term. IMO, the surround sound is responsible to a large degree for the "immersive" effect anyway, so might as well get comfortable if you're gonna be passively sitting for a couple hours, instead of hunched over a keyboard, mouse or joystick shooting aliens..