Since you can now get your hands on surprisingly good HD Ready DLP projectors for under £2,000, we can't help but raise a question mark over the £3,500 price Norwegian outfit ProjectionDesign is asking for its Action! Model Two.

This projector's remarkable smallness will probably appeal to many home users, especially as it's accompanied by a glossy finish available in three different colours. But can something so small and stylish really deliver the sort of serious AV kick this huge price tag really demands?

Connectivity is decent, including a DVI port for digital HD video or PC use, component video jacks, a VGA PC input, and unusually, a LAN connector for fitting the projector into IP-based AV systems. A second DVI or component input wouldn't have gone amiss, but this is only a small complaint.

As you tour the Model Two's innards, its price starts to make sense. For instance, the chipset at the projector's heart is Texas Instruments' impressive 1280 x 720 Darkchip3 affair.

Also, the entire optics section is completely sealed to prevent dust entering and light seeping out, and a rubber cushion separates the internal projection mechanism from vibrations in the main bodywork. The whole functions as a heat sink to take the pressure off the cooling fans (reducing their noise in the process).

More clever tricks find a colour tone hand-tweaked on each model to make sure it's perfectly aligned with the industry's video-optimization standards, and a proprietary video processing system that's stored on just one chipset, avoiding the usual potential for interference where two or more are used.

After a surprisingly simple few minutes setting the Model Two up, we settled back to enjoy the show. And enjoy it we certainly did.

With our test disc of Kiss Kiss, Bang Bang, we were struck by how well the Model Two handles the disc's vivid, noirishly stylised colour transfer, thanks to some rich saturations and a huge contrast range.

Even more tellingly, the projector keeps a perfect handle on skin and lighting tones throughout the movie - no mean feat given how many dark, artificially lit scenes there are.

The Model Two's dark bits also benefit from far more greyscale subtlety than is common for a projector this side of £5,000, giving scenes a striking sense of scale. Detailed sequences look fabulously sharp, thanks to the ProjectionDesign's superb fine detailing and clarity.

The picture isn't perfect. Some of the action sequences in Kiss Kiss, Bang Bang show traces of dot noise over motion, and flicking your eyes over the film's intertitles can show gentle traces of DLP's rainbow effect.

But these two niggles are really the only things the Model Two perhaps has in common with the new budget HD Ready models now appearing. In every other way it's in so different a league that the £3,500 asking price actually looks like a bargain.