Conjugate-optical retroreflector (COR) display systems have the potential for providing inexpensive high-resolution imagery in a head-mounted display (HMD) configuration. There are several perceptual issues, however that need to be addressed before a COR display system can be used effectively. One issue is the choice of projected-image location relative to the retroreflective screen, which is determined by the convergence angle between the binocular channels of the COR display. Another issue involves visual half-occlusions, which can occur when a portion of the stereoscopic image is visible to only one eye, as may occur in any HMD. If half occlusion are simulate in a COR display in a way that is inconsistent with natural viewing, undesirable perceptual effects may result. In the present paper we first describe, the optical principles that underlie the COR display system. We then discuss the importance of binocular convergence and describe a COR display configuration that eliminates inconsistencies in the depth cures provided by displayed surface properties and half-occlusions.