The components in optical projectors are becoming increasingly smaller due to the need for increased output resolution and the desire for small form-factor devices. One such component is Liquid Crystal (LC) panels, that utilize periodic micro-lens arrays which become more sensitive to diffractive effects as the period becomes near/sub wavelength. This paper explores the diffraction effects within these systems through numerical modeling. Traditionally Ray tracing techniques have been used for analyzing projection systems and has led to significant improvements in illumination uniformity and efficiency. However, increasingly complex projector designs that incorporate smaller geometric features like micro/nano lens arrays, including coherent diffraction and interference effects arising from such structures, cannot be handled by ray-tracing approaches alone. Rigorous electromagnetic (EM) wave optics based techniques, such as finite-difference time-domain (FDTD) and rigorous coupled wave analysis (RCWA) which solve Maxwell’s equations must be used. These rigorous EM techniques, however, have difficulty in analyzing the larger projector structures due to computational resource limitations. We use a mixedlevel optical simulation methodology which unifies the use of rigorous EM wave-level and ray-level tools for analyzing projector performance. This approach uses rigorous EM wave based tools to characterize the LC panel through a Bidirectional Scattering Distribution function (BSDF) file. These characteristics are then incorporated into the ray-tracing simulator for the illumination and imaging system design and to obtain the overall performance. Such a mixed-level approach allows for comprehensive modeling of the optical characteristic of projectors, including coherent effects, and can potentially lead to more accurate performance than that from individual modeling tools alone.