Is it legal to have an electrical outlet in a wall cavity?

The term "wall cavity" usually refers to the space between studs. Outlet boxes are usually fastened to one side of a stud or the other. Sometimes they are fastened to a crossbar, whether metal or wood, so they can be placed anywhere within the space. There are height limitations in order to count as required outlets but may be placed anywhere you need one. They are called convenience outlets and my friends often hear me say that if one isn't convenient, there aren't enough.

If by "wall cavity" you mean a completely walled off portion of a building with no access, something that sometimes happens in commercial buildings, then no, it is not legal. You must have access to any splices in the circuit, which includes end of the line.