Since the Arc uses two upward firing drivers and two side firing drivers, there needs to be a minimum of 4” of clearance above the Arc and at least 1 foot of clearance on each side of the Arc. If the cavity can meet these requirements, it should be fine.

Hi

IMO the best placements for the Arc are:

In front of the TV (5 inches) if both are to rest on the same cabinet with enough height clearance (TV) so that the Arc will not block any of the lower portion of the TV screen.

Below the TV if both are wall mounted. Click the link for proper wall mounting.

https://www.sonos.com/en-us/guides/arc#to-wall-mount-arc

Both of the above placements will anchor the dialogue to the TV screen. That said mounting the Arc above the TV is not recommended.

Placing the Arc inside a cavity will most likely negate it’s upward and side firing speakers. A Beam-Gen2 would be better suited to retain Dolby Atmos effects (though not as robust as the Arc); or a Sonos Ray if Dolby Atmos effects are not a priority. 

If you want it in a cavity consider a sliding shelf under it so you can pull it forward, out of the hole so you can get the full effect. When not using it or not wanting the best possible sound just push it back in.

Thanks Everyone
I think i will just put both the TV and sound bar on the wall. That way i will get the best acoustics from teh system