Many thanks to everyone for their input. I never cease to be amazed at the wealth of knowledge and experience available in forums like this. After reading your posts and talking to myriad dealers (a painful experience at times) I've decided to go ahead and mount my RS-7's to the paneled wall, which was always the best option apart from the cosmetic damage to the paneling. I was more comfortable cutting a big hole in a repairable, plastered ceiling than a small one in a very visible, paneled wall. As it turns out, it's not going to be as bad as I thought - got six holes drilled and they are hard to see even when looking for them.
Now, here's a twist on the original question: My RS-7's point straight out from the wall and they are mounted high - about 8' up. There's no good way to point them down toward the listening position. This is less than optimum but I have no real choice in the matter. Hopefully, my receiver's room EQ function can correct for the physical location of the speakers. Would in-ceilings have been better (theoretically) because they are down-firing? The adjacent wall would also have reflected sound toward the listener which, I would think, is a plus...