first the door will open up into the fixture if they extend out too far. I would consider going over the mirror.

I don't have a pic or drawings of where the door opens to. I would say your best bet (I've done many bathrooms) is to put the sconces on either side of your mirror about 2/3 to 3/4 up the sides of the mirror. You get better light than putting the sconces up above the mirror. It's just a better look.

I'll be putting them on the sides for sure. I just need an answer to my original question. Thanks for the replies!

the answer is yes they need to project beyond the cabinet to eliminate shadow, at least flush with. The light will still radiate if they dont placement is key so the light is not in your eye. but the door on your cabinet will not open all the way.

Thank you for your answer.

Follow up question: We are planning on buying a medicine cabinet that is 52" high (it has two doors, basically two cabinets stacked on each other - we need the extra storage). It would like like the first pic above with the open door with a 2nd one on top. Like in the pic, we'll have a backsplash and the cabinet would start just like in the pic.

Where would you place the lights? Face level, or higher?