Ive only done one Atmos theater, and we used floor standing speakers for fronts, rears, and sides, and in- ceiling for the atmos speakers (At the time Atmos had just released and I dont think any speaker manufacturers had released their Atmos speakers yet.

So yesterday upon returning to work, I walked into a typical case of sales puke ingesting foot. We are in the middle of wiring a new home. The "theater room" is not a dedicated theater. Its part of a large area with a two sided fireplace separating the theater from the game room area. It will have an 85" panel instead of a screen or projector. The fronts and center speakers will be built into a custom cabinet with the TV. The surrounds and rears are in ceilings. For atmos can I add 2 more in ceiling speakers running front to back of the room?

I picked the wrong week to stop sniffing glue.

The speaker position requirements are a bit strange compared the the traditional configuration. If you really want to follow Dolby specs., the side surround speakers should be ear level or no more than halfway up the wall. Ive found this seems to close to listeners at the sides of the room

Yes, atmos speakers can go in the ceiling.

[Link: dolby.com]

But will it work if the surrounds and rears are in ceiling also?

Also, is 7.1.2 or 5.1.4 better?

It will “work”, it just won’t be as good as it should be. Using angled-baffle speakers for the surround channels, reflected off of walls will help.

What is the seating layout? I’m assuming you don’t have multiple rows of seating.

Seating will be a couple large sofas or probably a sectional. At least that’s most likely what it will be. It will not be in rows or traditional style theater seating

I like to do 5.1.4 configs.
Have done many with all 3 pair in the ceiling.
Optimal, no, but still sounds bad ass.

With all speakers in the ceiling, I would go 5.1.4 over the 7.1.2
If for no other reason, you only have 2 speakers out of optimal place rather than 4.

And like osiris said, using angled ceiling baffled speakers will make a big difference for those out-of-place ones, bouncing sound from the optimal places on the wall.

I would agree with this as well. I've done it a few times for sure.

I actually have 6 in-ceiling (along with Def Tech BP towers and center for fronts) in my basement because it would be too goofy to try to place the rears according to Dolby specs with the way the room is shaped. And I love it!

This shows that while we should always shoot for perfect per theory, reality is a lot more forgiving than theory.

Right. There's what looks good on paper (for specs), and then what actually works in the customer's space.