Well, some things to keep in mind:
* Resolution. Let's assume you're making a 3"-wide board (~75 mm) and using a 600 DPI laser printer - the bare minimum IMO. You'd get 1800 pixels across the board. Now, most LED DLP projectors are 800x600 at best; this will severely restrict your line pitch. The projected pixels would be around 0.1 mm, which is a lot if you want to do fine-pitch stuff (most of my traces are 8-mil, or 0.2 mm - you'd be lucky to properly do 0.4mm traces).
* Optics. Will your projector actually project a flat image onto the board, or will the corners be blurred? If they are, it's useless.
Also, will it project sharp pixels or blurry blobs? Will it focus close enough?
* Contrast ratio. If your contrast ratio is too low, you may easily expose all the photoresist, not just the one you want to expose.
* Boards. You will need either pre-sensitized boards (coated with photoresist) or laminate your own boards, which seems like a huge pain. You'll also need a developing step which isn't required when using toner transfer.
Now, for the positive things: It should work, assuming the above conditions have been fulfilled. I was playing around with drawing random patterns using a UV/blue laser on some scraps of board I had lying around, and it worked a treat - it exposes really quickly, even at just 10-20 mW. If you drop a pre-sensitized board in developer solution and shine a laser at it, you can see it change pretty much immediately, trailing a tendril of "smoke" (dissolved photoresist) after it.
But all things being equal, unless you need to either make VERY large boards or need them in a hurry but isn't willing to pay for a quick service, just go to Itead or Seeed. They're fast enough for hobby work, have very reasonable prices, and the quality is perfectly fine.