Flat screen tv on wall with sky package, where to hide sky box where it will work ?

You can hide the box in a cupboard but it mite overheat if poorly insulated but you will need to factor into consideration.

1: How to connect to tv, preferably HDMI for better picture.
2. How to get sat cables to desired location.

If its all possible then you could put a magic eye outside the cupboard to control the sky box...

A magic eye is a small device that will send a remote control command back to the box via an rf cable fed from the rf2 connection on the back of all Sky boxes except the new standard box.

You can get extremely small ones no bigger than your thumb in size and there great, most people would use them to send the signal to a second room but they can also be used to help hide the box, as I said earlier your only problem is how to connect this to the tv.