All of the houses our company builds have very high quality recessed speakers everywhere. The in-ceiling and in-wall systems these days, I dare say, rival and surpass most of the simple systems my friends had in the 1970's and 1980's, and even beyond. The first time I was really impressed with in-ceiling speakers was about 8 years ago when the clients actually cared about how the whole-house system was going to sound. The key lately is the back-box the audio guys are using, along with the super duper speakers being utilized. In-wall subwoofers work well also. But we have not yet built a dedicated listening room, even for the guy that spent $400,000 on ONLY Audio Wire. His system had the speakers hidden in a non-dedicated room. Not dedicated, not multipurpose. Also not my cup of tea.
Like has been said, with the advent of large panel tv's, projectors aren't as much of a requirement for friends to come over for a really nice Movie Night!. (The period is not redundant. Movie Night! is how I write it as an event since that's the title of my events.)
We finished a house last year that has a multi-purpose great room that measures 47' x 29' with exposed structural timber post and beams 23' high. Stack my house on top of itself, and that's the size of the great room - give or take a little. Kitchen and dining at one end, entertainment and fireplace at the other. It's all mounted speakers and in-wall subwoofers, and a 85" tv. A theater doesn't have the attraction from a social/entertainment point of view. They host a lot of parties and while the parties involve watching movies and sporting events, a theater would be limiting, requiring total attention to just the movie. A lot of folks want the flexibility to be in the same room socially but also be able to chat in the kitchen, or move around, etc.