I don't know if anyone mentioned PURPLE ROSE OF CAIRO. But you may be
interested in the dramatic device of characters onscreen pleading for
the projectionist not to turn them off. Also there are a number of
audience shots in the film.
 
The John Badham feature THE HARD WAY has an intricate movie theatre
sequence in which the protagonist, an action film star, interacts
literally with his projected image during a gunbattle. There's a pretty good
counterpoint gag of a small boy's mesmerized face amid all the mayhem.
PREMIERE magazine did a "Shot-By-Shot" article when the film came out a
couple years ago.
 
Lastly, take a look at Chuck Jones' 1952 "Duck Amuck" in which the
cinematic apparatus becomes part of the narrative (soundtrack, split
frame, etc.) Its relevance to your program aside, show it no matter what.
It's about the fastest 8 minutes you'll ever see.
 
Tag to the guy who was interested in prison films: the 1991 ref text
might not have a fairly decent Tom Selleck vehicle AN INNOCENT MAN (dir
by Peter Yates?Hyams?) It's strictly genre, but the prison sequences, act
2 of the screenplay, have bite. The protagonist undergoes an extreme
physical transformation and even premeditatedly kills. Not a bad flick.
 
And AMERICAN ME might work for you, and it wouldn't be in the ref text.