Thanks Chuck, this is where I feel it gets a little grey - most of the termination restrictions are clear cut and you can see the reasoning. But when this is specified and there is no clear reasoning for all eventualities, I feel it needs to be challenged - but I'm unsure how to get a definitive answer without being gas safe registered and obtaining direct advice from them."... an opening into the building fabric formed for the purpose of accommodating a built-in element" is not referring to a window but a hole that has been cut through the brickwork to accommodate a frame, which is exactly what is being proposed. I think there is a risk that this may come back to bite you if you allow it. I doubt it's a big risk, but a problem with things done in unconventional ways is that they attract attention.
I have currently requested the plumber that is concerned to do exactly that, hopefully he can obtain some comfort that this is OK; likewise, if not, hopefully there is a work around.
EDIT: Thanks Last Plumber, I think I'm on the same wavelength with you here - there are a few things that I'd prefer to challenge/ask why, rather than just take it for gospel! Making the panel flush could be an easy workaround, thanks for that.