Now I'm hyped for the Palace Cinema and here's why!
You treat the room at the top of the Palace Cinema as a private screening room for Directors and/or big wigs and their guests, and you build next door either as part of the same street or as the beginning of a new street: A 32x32 or 48x48 Theatre for the Masses!
Now you made me wish it wasn't a corner building, as I could have extended back and not worried about the facings.
Your idea sounds great but would mean keeping the character of the building...which means buying two cinemas
..I do have an old 2nd gen iPod touch lying around though. Hmm.