Chris - Not sure what your A/V experience is or if you are a professional woodworker.
There are potential audio issues with either setup which come into play, and I would be hard pressed to tell you which would be better or worse, but since both lock you into a static location for the speaker, I would likely go with the one which sounds to me like it will present the least amount of issues and that is not completely enclosing it.
Now, I want to add, that I have worked with a fair number of woodworkers for A/V cabinets and the one thing I've learned is that almost none of them know how to build properly vented A/V cabinetry. A very few have come pretty close.
Ventilation is the lifeline to A/V gear, and boxing stuff in kills the gear. Simple as that. Most gear requires several inches of free flowing air on either side, and often top to bottom with a maximum air flow temperature of typical room temperature - 60-75 degrees.
The problem is that you then need a place for the hot air to go when it comes off the gear, and a place for the cool air to come from. The best way to do this usually is to open the back of the cabinetry up, include vents on the FRONT of the cabinetry that are large and really do allow for air flow, or to incorporate fans for intake/exhaust into the design.
If the hot air has nowhere to go, it will circulate within the enclosure and will fry the gear almost everytime.
Likewise, don't forget that there are a lot of cables which connect things, and they need to get up to the TV and connect to each other, so shelving that goes clear to the back is a very poor design method. Likewise, if the entertainment center has several sections, the section dividers should not go to the back so that cabling can pass freely from one section to the other.
Keep in mind, an A/V receiver, even a cheap one, is at least 15" deep and then has connections which must be made to the back of it. Having shelving of at least 20" in depth would be what I would consider a minimum requirement.
http://usa.denon.com/ProductDetails/4222.asp (see the detailed specifications)
I'm not a woodworker, but I certainly have seen more than a few woodworkers who have shown that they take very little thought about what is actually going into what they very expertly build. So, I would ask that you consider everything related to the A/V going into your handiwork if it is you doing the building.
