I am finishing my basement right now and planning for a projector/screen. I have an audio system I plan to move down there.
My front speakers are floor standing Boston VR's and a VR 12 center. I am thinking about building them into the walls. I would build shelves behind the wall and set the speakers up on the shelves at the same height as the projector screen (one to each side). Then cut holes in my drywall where the cones are. The speakers would sit on the shelves behind the wall, with the cones visible through the holes. Then I was thinking I'd just drill some holes and mount the grills to the face of the drywall.

Has anyone seen this done before? Will it sound ok or do I need the complete speaker in the actual room?

Most speakers with any kind of bass have some kind of some rear bass openings. If your speakers have something like that, building them directly into the walls will definitely limit your bass output. Moving air is extremely important. Limiting that air movement with walls or holes is usually a bad idea.

There is a rear bass opening. Hmm, now I really have to wonder if I should try this.

IMHO it will not sound good. Floor standing speakers have enclosures designed for the speakers including the ports. Proper placement is aways from walls and corners anyway.

OK, that settles it. I will come up with something else instead.
Maybe I'll build built-in platforms in the front of the room and set the speakers on them.

I know you have stated that you have speakers alerady but since you are building the room, you may want to consider in wall speakers if you can either sell or use the existing speakers in another room. I am aware of the in wall debate about how they sound but I went though the very same thing you are and ultimately settled on in walls as a way to free up floor space and not to have to worry about cables.

Just a thought.