In projected mode, you have to specify a map profile (i.e. a map projection). You also need to tell osgEarth the spatial reference of your feature data if it differs from that of the map.
For example:
<map name="demo" type="projected" version="2">
<options>
<profile>global-mercator</profile>
</options>
<image name="world" driver="gdal">
<url>../data/world.tif</url>
</image>
<elevation driver="tms" name="ReadyMap.org-Elevation">
<url>../data/elevation/tms.xml</url>
</elevation>
<model name="polygon" driver="feature_geom" overlay="true">
<features name="data" driver="ogr">
<geometry>
POLYGON((-74.096 40.332, -74.096 42.386, -70.988 42.386, -70.988 40.332))
</geometry>
<profile srs="wgs84"/>
</features>
</model>
</map>