I use THX mode on my Panasonic G20 plasma without incident, and I'm aware of other gamers who use it on LCD/LED panels without a problem. I even pipe in my PS3 signal through a DVDO EDGE Green processor before sending it to my TV, and the input lag isn't detectable in most games.
The exception to this are fighting and rhythm games, where input lag can seriously affect how the game plays. Regardless, I've yet to see a significant downside to using THX mode with regards to gaming, or any downside at all.
It's also worth noting that the Xbox 360 upscales its games as well before final display (most render at 720p, so 1080p output users have everything scaled), so one way or another, a video processor is going to add input lag to modern systems.
Ultimately? The best judge of it is yourself. Try it with, and try it without. Whichever you prefer, you can make it work to your situation. And if input lag is a serious concern for you, find an old CRT projector or TV on eBay or the AVS Forums.