In my experience, top down projection is preferable to bottom up projection.
There are a number of reasons for this. The projector can be cheaper with top down projection as throw length is not as huge an issue as it is with bottom up projection. The table requires no special modifications when used for top down, whereas bottom up has a number of significant (and expensive) design issues which can make use of the rest of the table -- as a table -- problematic.
But the biggest issue in favour of top down projection is that it allows you to put things on top of your projected map surface. THIS IS NOT A BUG -- THIS IS A FEATURE.
It's a feature because with top down projection, you can use simple blank (as in plain white) 3d "terrain" to add height to your projected map. Just putting down a few layers of "stepped" overlapping blank foam core where the dais is indicated on the map, or for building raised walkways over a portion of the map are very cool - as they reflect whatever map feature is projected on to them. You can do some amazing things using this approach, and the 3D terrain you have to "build" for such an effect takes almost no time whatsoever to build. I recommend experimenting with this approach. Try it - you'll like it!
The idea of putting something like a 42" inch widescreen TV laid flat on a custom designed table would certainly be an interesting approach. Four years ago - it was cost prohibitive. Now? It's only as expensive as projection technology was four years ago, which is to say, "entirely doable".
Four to six years from now? I expect the size we could manage with this approach will exceed 50" and come close to 60" for under $1,000.00, all-in. That's pretty damn cool. Add multi-touch either via Wii-mote or some other surface manager? Even *Cooler*.
I highly doubt the flat panel would be adversely affected by being laid flat as old style tube monitor might be. The main issue to watch for is that heat will rising within the unit to the screen surface and not out the "top" of the back grill. I'd add some active fan cooling inside the flat panel if you are going to explore this method. A few PC fans should fix you right up.
When I first started the Coolest. Gaming Set-up. Evar. thread, there were only a handful of us using projectors to game. Since that time, there are now hundreds of groups who have adopted projectors into their games. In the intervening five year period, the cost of projection technology has dropped to less than half -- and approaching a third of what the cost of what it was initially. It's getting damn cheap folks.
For less than $300 (and sometimes closer to $200) you can pick up a used serviceable XGA projector off of eBay to use for tabletop projection. New projectors are in reach for $500-$800 without much difficulty. This is especially so with XGA format projectors as the home market moved to 1080p widescreen format.
Whatever the case, I wish you and your group the very best and hope that projection finds its way into your group's play style without too much trouble. Projection is not for everyone - and it's not for every game system, either.
As long as you prepare your game and how you will use the projector well and are patient in developing your skills in using it at the table, I am confident that your group will love it and will be reticent to play without it.
It does require a learning curve - and some patience from the players during the initial stages of integrating it into your gaming session. Once that hump is over with - it's pretty much smooth sailing.
Enjoy.