Maz, thanks for the tip.

I've been thinking on similar lines after I posted this question. Based on your suggestion, I've created a basic model in Sketchup. I created a box with cylinder hollowed from it. Then I tried to place the box in the existing panel.

While this concept worked in a trial home, it's quite a lot of experiment to strike exact balance between size of light fixture and the hole. In a way, it's like real world recessed spot light.

I'll update this thread once I have something to report.