FWIW, I posted this a while back in response to the same question:
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Here are my comments. I did this about 4 years ago when we bought our first flat screen TV. I wanted to make it a totally clean installation with the TV mounted to the wall like a picture frame with no visible connections whatsoever. So I embarked on this by mounting a recessed electrical outlet (like is used for a clock) and also put in a little plastic box that had a plastic conduit down to the basement for the signal wires. This was fine and dandy and I was able to place our cable box in the basement in close proximity, feeding it the remote's IR signals with a "remote repeater". But then I need to deal with the DVD player, which obviously wasn't very convenient in the basement. For this I placed it in a nearby game closet which we have, and ran what at the time was a hideously expensive 25' HDMI cable between the DVD unit and the TV (through the basement and up the wall). Later we bought a Wii and I bought a component video (and audio) cable that was once again long enough to reach to the game closet. The Wii uses bluetooth for the controllers so you don't need an IR repeater for that. These days the prices for those long cables have dropped dramatically but for these lengths, I wouldn't buy the cheapest one on the market.
The only modification I am going to make is to move the cable box into the game closet. Our lovely box has a habit of locking up or otherwise needing to be reboot, so that's a pain to run to the basement just to do that. It would be more convenient if everything were in the game closet.
What do you do if you don't have a handy game closet? Well then you are going to have to run the cables to a media cabinet (maybe with your stereo stuff?) or some other relatively close and appropriate location. I have heard of people locating their hardware in a nearby bedroom closet or some other location but that's kind of weird to run to your bedroom each time a DVD needs to be inserted (or the neighborhood kids bring over their Wii games). But hey, you gotta do what you gotta do.
Remember one thing though. Now this TV is more or less fixed at that location till the end of the universe, or until such time as you decide to patch up the rather large holes you made in the wall at eye level. If your wife likes to rearrange the furniture sometimes then this puts a crimp in that idea.
