We have come across plenty of these "closet" spaces builders leave open for a TV/ entertainment niche. Nothing really fits right, too much room, not enough room etc. A great solution is to build up the framing and drywall. Here are two examples.
This is the start of one for a modern flat screen. Framing then a drywall backer.
Finished up nicely with texture that perfectly blends to the existing walls. The black speaker down below is a mock cover that actually gives access to speaker components below as well as wire and power hidden from view. Very nice and clean. This picture shows the TV, satellite, DVD & stereo components fully wired. Not a wire in site. This one was custom built to fit an older projection style flat screen. We used a beautiful soap stone tile for trim. You just have to see this one in person to fully appreciate.You can see the wires in the picture but when everything is in place they are completely hidden.