Interesting project, but projectors always have the issues that they project shadows as well and unless you have every area filled in a redundant way, you will end up breaking the illusion when you enter the room and project your own shadow. On top of that, I am not sure if there's much to do, game-wise, in such an environment.
EDIT: I'd be more excited with Full Room VR experience, using Kinect devices everywhere to detect your movements, hands and so on.
Even more distracting than the shadows would be the fixed perspective. Unless you include some form of head tracking, the immersion will never feel real. Unfortunately, it'll limit one person per room.
Using the same idea as 3D projection, you could support multiple people per room, but with reduced frame rate and the requirement that they wear glasses.
With 6 kinects in a reasonable configuration, I imagine you could achieve some decent head tracking. Probably not good enough to be convincing, though.
There are a couple of dev teams working on something similar with Kinect(s) and Oculus Rift. The two main applications I've seen are VR "movies" that would record a scene with both video and depth information which would allow you to walk around in a recorded "scene" as it plays back. The other is focused on using depth cameras to capture depth and video information and then compress and transmit it to create a more immersive form of telepresence.
I think that sort of thing is a much "bigger" application of VR technology than the gaming focus that it's starting out with. Gaming makes sense as a starting point since there are already engines and frameworks in place for generating 3d content that can be rendered from different angles to create the 3d illusion.
Still, I look at it like the early nickelodeons and parlor games seen at the advent of motion pictures. I think it will be much more useful when you can place small, inexpensive depth cameras near the top of each wall of a room (for example) and use that to capture depth and video information. That could be used to build a real-time 3d map of a room and people in the room and used in recorded or live communication. I think it's already at the point where this stuff can be done in a prototype form but as head-mounted displays and processing hardware is refined, it will be able to move from something requiring ski goggles and beefy workstations to streamlined specs and consumer-electronics base station appliances.
The shadows would not break immersion if they are part of the game. Either a significant part, such as the shadow is a representation of the player which needs to dodge light bullets.. Even if the shadows are not a significant part of the game, the player character and all the objects in the room both projected and real need to have a shadow in the game world. Instead of the computer having to calculate and render every shadow the projectors will take care of the shadows for the real objects as a side-effect.
> Instead of the computer having to calculate and render every shadow the projectors will take care of the shadows for the real objects as a side-effect.
I'm not convinced, since the abundance of projectors around the scene is going to create multiple shadows all around - therefore you do have a problem of an innatural amount of shadows, just like on a football field at a night game, with 6 or more shadows around a single person.
EDIT: I'd be more excited with Full Room VR experience, using Kinect devices everywhere to detect your movements, hands and so on.