We installed recessed cabinets on an outside wall and had two problems. Problem #1: when the siding folks installed siding, they managed to nail through the back of both cabinets, shattering the mirrors. The contractor replaced the cabinets at his expense. The second problem was that there was no room for insulation. That turned out to have an excellent solution. We installed thin insulation with a high R-value behind the cabinets and framed the cabinets with molding to cover the portion that stuck out from the wall. This gives the cabinets greater definition, and they look better than they would flush with the wall. Had I realized this when I ordered our bathroom cabinets, I would have ordered extra molding to match the cabinets. As it was, we painted the molding the same color as the bathroom walls.

Suero, I'd love to see pics if you have any. I love the idea of the molding. I don't have to worry about siding...my house was already sided...over stucco(I would rather have the stucco but that's another post) :)

My bath is soooo small, I was also trying to think of how to fit in a vanity that has the 'tower' on it for storage and just put a mirror on the wall...but I think the recessed cabinet is what I would prefer and would like to make that work. I really can't stand how it juts out over the vanity.