I have Dynasty cabinets. The recess is 1-1/4" deep and our puck lights are 1" deep. However, I do not agree with your KD that they will be completely concealed unless the person is standing right next to the cabinets and that person is tall rather than short! The other thing to consider is that the lights will NOT be right up against the front of the cabinet, they will be in the middle, thereby making them more readily visible.

As to whether it will look unfinished w/o light rail, I think that depends on the style of cabinets and your overall kitchen style. If you have a sleek/minimalist kitchen, then it probably will not look unfinished with one caveat...Dynasty cabinets are NOT finished on the cabinet underside in the same finish as the rest of the cabinets (only the Omega Custom cabinets come "standard" with the finished undersides). If you have a medium-to-dark finish I think the unfinished underside will be visible b/c the back edge of the cabinet that sticks down (and will be visible all the time) is not finished.

Another thought...when the lights are on, the light rail seems to help diffuse the light somewhat so it doesn't look like it's coming from only one spot.

I really think you should insist on light rail.

Spacing...I have 1 puck light centered under each of my 18" & 21" cabinets and 2 puck lights under each of my 23" cabinets.

HTH!

I have Omega and even with our simple shaker style in the kitchen, the light rail is necessary. Omegas do come with a standard finished bottom, but that wasn't enough to hide our lighting (the rail system verses pucks) so I have to now add a trim piece to hide the lights. Unless you have very sleek and modern cabinets...the light rail at a minimum should be added if you can swing it (cost wise) as it does finish off the look so much better than nothing at all.

Traditional style : I always like the look of some type of light rail even if it's only 3/4" molding.
Agree it gives more of a finished look.
Also when you're sitting at a table the trim will hide the lights.
Spacing: check with your designer /electrician
Undercabinet lighting is considered "fill light"
to fill in shadows from your general lighting as well as for task lighting.
You may not need them under every cabinet, it's up to you.
some recommend every 12 "
Check to see how you want to place them,front or centered more for task lighting.
Remember, they can also be put on dimmer switch:)

I waited on ordering ours until everything was done and yes we need it. You can't see the undercab lights much if you're standing but it you're sitting at the island or a regular height chair near the area it's annoying. The molding was the cheapest thing of the cabinet order ($136) from Decora which is a semi custom line.

We are installing Dynasty cabs this week and yes my KD ordered the light rail and my electrician agreed I needed one. HTH