Hi Tommy;
Welcome to PhotonLexicon. Sorry that I'm a little late getting to this thread... I've been rather busy lately.
It sounds like you've been bitten by the laser bug (as all of us have been), and now you want to use your laser projector in a club to promote a band. And while that sounds very cool and fun, you have to understand that what you are talking about doing is currently against the law here in the US with the equipment you have. Please allow me to elaborate:
In the United States, any "demonstration laser product" (a broad category of products that includes all laser light show projectors) must adhere to the rules and regulations set fourth in 21 CFR 1040.10 and 21CFR 1040.11 These are Federal Regulations, which means they apply in all 50 states and in US territories. Note that certain states have their own regulations that go beyond the federal requirements.
Those regulations above specify that if you have a product that is capable of exceeding the class 3A limit (which is 4.99 mw), then you must apply for a variance for that product with the Center for Devices and Radiological Health (or CDRH). The CDRH is part of the US Food and Drug Administration (FDA), and they are tasked with policing everything from x-ray machines, to lasers for eye surgery, to laser projectors and laser light shows.
The variance for the product (in this case, your projector) is a documented report that explains how you intend to make the product safe even though it exceeds class 3A limits. The way you file for the variance is by completing a "laser product report" and submitting it to the CDRH. This is a 34 page document that describes your projector in detail. You'll need lots of supporting documents too, including pictures of warning labels, block diagrams of the electrical circuits inside, a beam-path diagram, an operator's manual, and so fourth.
Then, once you have certified that your projector is compliant, you need to file a second variance application for the show itself. This is the "laser show variance", and it's a much smaller application - typically only 2 pages plus a few additional diagrams showing how the projector will be positioned relative to the crowd.
Here's the important part: This paperwork must be completed and filed before you ever do a commercial laser light show. If you don't have the paperwork completed, you are in violation of federal law. (Cue dramatic music here) This is a bad thing!
Now, even if you have a properly filed and approved variance for both your projector and your show, you still have some rules that you need to follow, and one of those rules is that you can't send beams into the audience. You have to keep them at least 3 meters off the floor.
Note that it *is* possible to apply for and be granted a special "audience scanning variance" from the CDRH. However, this is well beyond what most hobbyists are willing to attempt. There are only a handful of such variances in existence, and for good reason. The extra equipment needed to outfit (and test) a projector for audience scanning is prohibitively expensive. The calculations required to prove audience safety are complex, and they must be done for every show. And the risk of a lawsuit is much greater. Only one or two companies in the US have audience scanning variances.
So to answer your question, no, you can't use your projector to scan the crowd at the show where the band plays. In fact, right now you can't use that projector in public at all, because it does not have a variance, and you don't have one for the show either. To be legal, both the projector and the show need to be varianced.
To bring the projector into compliance so that you can get a variance for it, you're going to need things like an emission indicator, a power-on delay, an interlock (which shuts down the projector if the ILDA signal is removed), a remote kill switch, several safety labels, and so on. Search through the forums here and you'll find plenty of threads talking about these topics. Or better yet, go to the CDRH website (links above) and read up on the requirements yourself.
Also, you may want to consider attending Casey Stack's Laser Safety Seminar this August 23rd. It's going to be held in Newton, North Carolina, right after SELEM. Details in the meet and greet sub-forum. (See links)
With regard to your other question about using a lens to widen the beam to make it safer, this is something that many hobbyists do in their own homes to increase the safety margin, but this is not acceptable for a commercial laser show in public. Remember, in public you are gambling with other people's eyes, not just your own.
If you are going to use your projector in public, you absolutely must have a variance, both for the projector itself and for the show as a whole. Anything else would be considered willful negligence in a court of law, opening you up to just about unlimited legal liability. (Not to mention potential criminal penalties.)
In short, don't do it.
Adam
Edit: Just noticed Marc's excellent reply above. Lots of great information in there!