If one were to have in-walls, the rears are the only way to go. They probably don't sound bad at all.
The downside is their inability to develop a more full sound before it reaches your ears. Same with the front speakers, you don't want them against the wall/corner. If placed properly, you shouldn't be able to tell where the sound is coming from.
I don't have rear speakers, so your home theatre probably sounds better than mine as I don't have a true surround sound.
Keep in mind, I am very knit-picky with my sound. Most are not, and sometimes I feel what I think sounds better might be subjective or a placebo.