That depends. There are certainly benefits to both. Personally, I love a rack setup, but at the same time I want it accessible if possible. Not always the case with a nice looking HT with limited space, but if I had it my way, I'd have enough for a full size rack built into the wall in the back, where the rack sits in an adjacent room. You can isolate the noise pretty well and cooling shouldn't be an issue if it's open air in the back like mine was.
Honestly, one of the best compromises I've found is a nice A/V cabinet that you can leave in the room, but has built-in rack rails and cooling. Salamander has a few that score high on the WAF but are pretty darn functional too. Win-win. They also have some that are like full size vertical racks, but you can leave in the room, or next door without having to look like industrial racks like mine. Just looks like a nice piece of furniture. Personally, I like Middle Atlantic the most, but I might go Salamander on my next one due to more limited space in my next house.