The latest arduino project involves a rainbowduino!
More a proof of concept then anything practical, some pieces of wood a lens a rainbowduino and an arduino.
It is pretty dim, but works well in dimly lit environments, it also lacks a focus function as the distance of the lens is fixed. However it does seem to work :)
Default rainbowduino firmware is used for now, the lens does mirror the image projected so when displaying characters keep that in mind (it should be fairly simple to mod the firmware to mirror the char in software).
Not yet sure if I can do anything practical with it, but it could be made as a scrolling information display.