Hi John.
Sorry to come late to the party, but I may be able to provide some answers for you regarding the projector (PJ) and what "rainbow effects" (R.B.E.)are.
I've never seen RBE, so I'm not sure if I'm one of the folks who are susceptible to it so I can't tell you with first hand experience if what you're seeing is indeed RBE, but few are bothered by it so the chances you're one of them is slim.
Here's a very good explanation of what RBE is from ProjectorCentral.com:
It's too much to copy and paste, but go about halfway down the page and look for,
"A Potential Problem with DLP: The Rainbow Effect"http://www.projectorcentral.com/lcd_dlp.htmI
ASSUME that this PJ uses a "1X" speed color wheel based on it's age. I poked around the specs but can't find where it says what type of wheel it uses. That's why I'm assuming it's a 1X. otherwise they'd be bragging about it being more. No reason to brag on "Gen I DLP technology", if you know what I mean.
About that trail you're seeing; Is it like a glowing/ghosting effect that follows?
For instance, if you have a fellow with a black suit on with a white shirt and he move to the side, does the white shirt "bleed" onto the black jacket?
If so, check your PJ's settings. You may have things cranked up too much (contrast/brightness etc....)
The unit may have been used for business presentation and in most cases the setting are turned way up make up for excessive throw distances and rooms with much more ambient light than your living room has.
If you don't have one, check into a video calibration disc from AVIA, or ...... can't remember the name of the other popular one. They're cheap, like $20-$30 for a DVD. They're very easy to use.
The unit is out of production, and (surprisingly) more information isn't to be found on "the king of PJ websites", so without an all out massive Google search for more info, I can't tell you much more.
An interesting thing I notice regarding the physical design of the unit:

That's a weird "cave" the lens sit in. It would seem to me that the reflective silver paint "in the cave" would alter the image after passing through this area. I'd hate to use the word "tweak", but I wonder what would happen if this area where flat black, or something non-reflective......... aa
Bob