Humidifiers and Dehumidifiers - Can I build a dehumidifier into a wall?

I am in the process of finishing off my basement and would like to build a dehumidifier into the wall. The box itself would take up a small section of a bedroom closet which backs up to an unfinished utility area so getting rid of the condensate would be no problem. I was planning on putting the face of the unit facing the finished area with a hot air return grate over it. The only concern I have is that the dehumidifier will get to hot in the box and be a fire hazard. Is this OK to do or should I try to find another solution? Also is it possible for me to line the box with sound deadening foam insulation?

Not a good ideal. These units should be standing alone in the room.. Needs air movement.

Do you have a/c in the home?

No Jay, no air conditioning in the house and the basement is completely below grade. There aren't any water issues but I want to make sure the area stays good and dry. Leaving the dehumidifier in the room probably won't work because I am quite sure the future tenant will turn it off if it bothers them. I figured if it is in the wall and they have to remove screws in order to turn it on and off it may discourage them from doing so. I planned on putting it on a timer so that it runs primarily during the day when they are working....The other option is to build the box so that the side which faces the non finished utility area also remains open to promote better airflow. The bigger thing I'm concerned about if it is a safety hazard or not.

Like Jay suggested, dehumidifiers require unrestricted airflow.
By mounting the unit in the wall you will be drawing air from one side of the wall and discharging it on the other.
This would be considered an obstructed air flow.

I personally do not like dehumidifiers because in my opinion they are used because of a lack of air flow.
All homes need good ventilation and when humidity levels build up to the point of being a problem, it is a sign of a stuffy house..
Perhaps a small ventilation fan running continuously would alleviate the problem.
The proper solution to a moisture issue beyond locating the source of the excess is a heat recovery ventilator but this goes a bit beyond your original question.

Let us know if you need more.

Thanks for the input Greg. I would love to be able to get away without using a dehumidifier but the house is right on the bay so even though there is plenty of natural air flow and ventilation it is usually at a pretty high level of humidity. I appreciate your advice and think I will see if I can come up with an alternative.