A transportable image display system having direct and projection viewing modes of operation. The image display system comprises a spatial light modulation structure for spatially modulating the intensity of light produced from a light source, and light diffusing panel of electro-optical construction having a light scattering state in which light being transmitted therethrough is scattered in a diffusive manner, and a light transmission state in which light being transmitted therethrough is transmitted without substantial scattering. In the illustrative embodiments, the spatial light modulation structure can be an electrically-addressable LCD panel, or slide-film structures to be viewed. During the direct viewing mode, light produced from the light source is scattered by the light diffusing panel and spatial intensity modulated by the spatial light modulation structure to form a first image for direct viewing. During the projection viewing mode, light produced from the light source is transmitted through the light diffusing panel without substantial scattering and spatial intensity modulated by the spatial light modulation structure to form a second image for projection onto a projection display surface for projection viewing.