I too had considered making my living room as a theater but i realized various problems and dropped the idea.
- There is too much of sunlight and very large sliding windows. I hate curtains in a projector set up.
- If one has to go in kitchen then has to cross the living room. There will be too much of food odour from kitchen.
- There are maintenance issues of gadgets in living room.
- The shape of the living room is very odd (L shape).
- If someone is at the main door, he has access to the movie and has to be paused.
- The neighbor's flat owner talks sometime too loudly when someone is at their door, so their conversation sweeps into the living room.
- In living room there are over 51% of the contents which have got nothing to do with the private theatre.
- It is near to impossible in having a carpet in common area such as living room.
- 2 A/C's would be required in a living room and the worst is i could not do away with the 3 fan's.
- It is impossible to set a 5.1 in living room and i did not want to abuse a movie by using 2.1
- It is also impossible to get the acoustics done in a living room.
- Many more reasons
The most important is that a living room can never beat a higher end dedicated room for movies or projector related activities.
On the other hand i truly understand and appreciate the reasons to why many of them have a theater set up in their living room due to lack of space etc.
V
I don't agree with some of your objections. Blackout curtins are common in theaters. There is drapery used on walls and in front of the screen for decorative and sound control purposes.
I have never thought food as having an odour, rather an aroma. Perhaps a bit of instruction and enlightenment of kitchen staff can help. Some theaters actually vent the popcorn cooker aroma into the auditorium to get people in the mood to buy some.
If a person is at the door and the movie must be stopped, what kind of movie are you screening?

It is not impossible to have carpet in a living room. I insist on it. A good polyester or wool blend plush pile carpet is wonderful under the feet and marvelous to cut down undesired sound reflections.
Air Con is just flat needed. Fans will not do. Might as well take them out now and install a decent 2 piece A/C system. The temperature must be 21~22C at 45~55% RH. Keep in mind this comfort is not for you, it is for the equipment and furnishings. If you happen to enjoy it, thats nice, but it is really for the equipment to enjoy a long trouble free life.
I like 7.1 systems too, and it is not at all difficult to install in a living room. There are ways to hide the requisite wiring with mouldings, carpet (see why carpet is good?), drapery, sound control foam, or in hollow walls.
A dedicated space for a home theater is not without problems. It causes a territorial reaction in women, and they begin to store items only a woman would keep in line of sight of your screen. If a cricket test should be displayed on the screen they will start vacuuming back and forth, dusting, mopping, and talking. There will be water filled flower vases on top of your amplifier, and should you be enjoying a proper action movie, every ten minutes the door will swing wide, the lights will come on full, then she will inquire in a tone that could mean trouble; "Does it have to be that loud?
"Turn it down!"
Please don't take offense, I am just mixing a little advice with some fun.