do in ceiling speakers work well for a rear surround channel
Yes and no. I have heard in ceiling speakers used for rear channel in several displays and homes. It sounds fine until you have some effect that is clearly supposed to be coming from ground level. There is a scene in Gladiator in which an army on horseback comes from the rear channel to the front. With in ceiling rears it sounds like the horses are coming down out of the sky. That said, some people's rooms are such that only in ceiling speakers are really practical for their surround sound set up. In such a case I would not hesitate to go with the in ceiling speakers.
It also depends on the ceiling speakers you useDefinitive Technology has some where you can tweak the tweeter angle this will help, one of the advantages you have with wall mounted speakers is you can adjust the angle that the speaker is facing relative to the seating position, with in wall and ceiling speakers there is not that much you can do if you don't like the sound.
