Jamie and Greg hit the nail on the head.... inwalls with no enclosure except the studs and drywall will work, but they will never match the performance of a speaker designed from the ground up built with a specifically sized and tuned cabinet.
To get really descent sound with higher SPL's, low distortion, and good sound quality, you will have to spend a rediculus amount of money...
When setting up my Bedroom system, I was thinking In-walls at first but for the SQ I was looking for I would have had to spend almost double what I did on in-room monitors. I picked up some Paradigm Sig S4's and C3 for a really good deal and added some Studio ADP-590's surrounds...
I know in the end I am far happier then I would have been with similarly priced In-Walls.
Of coarse if High SPL's and good Sound Quality at those high SPL's aren't that important, then by all means go with the In-Walls.