You may use black. The walls should be dark to prevent light from bouncing around. Designers seem to forget that this space is dark so color won't show up anyway. The projection screen is what is important in the exhibit. (It is white).
Not if you have good light control in your space, i.e. no windows and track lighting. Window light is very bright and hard to control. A black ceiling is helpful.
Yes. There are new lenses that I'm experimenting with that will allow a smaller space, but keeping to the human scale is important, and people need room to move. The largest installation to date has a 24 foot wide screen with a dual projection system (at the Children's Museum Papallon in Mexico City). A 16x9 (HDTV format) version is now available that creates a wider space and allows more participants at one time. Please consult with me with your requirements and adjustments might be possible.
So far (21 years) so good. The least reliable component has been the fan in the power supply, which may fail after a few years. It is easily replaced. Feel free to contact any museum listed in my Bio for their experience. However, I've found that the exhibit outlives most museum employees and Directors.