Our situation sounds almost identical to yours.
Our walk-in pantry is also connected directly to the kitchen.
Since we too use the MW for melting butter and re-heating leftovers, we did just as you're suggesting.
It's been 2 years since we completed the kitchen reno and it has worked out well.
Here's a shot of the pantry followed by a shot of the kitchen to pantry entryway.

I am in the midst of our kitchen project. During our demolition we used our microwave more and since my pantry had an outlet in it I put the microwave there. I was/am toying with the idea of leaving it there. But what I don't like about it is it makes my pantry smell like food, and this is even though we use it very rarely. I end up leaving the pantry door open to get the smell out. My pantry is rather tight normally, it maintains a cool temperature all summer long, perhaps this is why the smell is an issue for me. Before I committed permanently I would try reheating a slice of pizza in your microwave in the pantry even if it was only in there on the floor with an extension cord.
I also tried my rice cooker in there and that was a complete fail as it made the space very humid. Now my bread machine is staying there however.

I was going to move the micro into the pantry, because I didn't want it over my cooktop or taking up valuable counter space. In trying to find a space for it though, we realized we had "dead" space in the back of the peninsula, where we could tuck the micro and a drawer under the counter. This way it's near the table, out of traffic and not taking up pantry space either. However, I still think it's a great idea to put it in the pantry if it works for you. I had been thinking, originally, of something like this:
http://smallnotebook.org/2011/10/20/open-kitchen-pantry-remodel-and-how-to-keep-it-pretty/

We put ours in the microwave for pretty much the exact reasons you mention: we have a small kitchen so anything off the counter is good, they are ugly and we don't use it very often. That was one of the better decisions we've made. When we redo our kitchen we're just going to leave it in there because it works so well. We've not had any problems with food smells.

We also have a small kitchen with practically no counter space, so ours is in the pantry closet. When we moved into the house we thought the previous owners were crazy for having a plug in the pantry, but honestly it's one of my favorite things about the kitchen. I don't do major cooking in it, but have never had any problems with food smells lingering in there.

WillTV, Yes, our pantry will be "connected" to the kitchen much as yours is. No door, spaces only steps away. I'm glad to hear your endorsement of this idea.

LocalEater, I hadn't considered food smells. Moving the microwave in there and giving it a chance is an excellent idea. I am planning to store most of my appliances in the pantry, but things like the rice cooker are lightweight and can be moved back and forth easily.

AimsKitchen, Good idea, but I have no space similar to what you're describing.

WiSailor and AustinAggie, Thanks for verifying that it's a do-able idea.

My micro is on shelf in the hallway/laundry area that adjoins the kitchen. I warm tea and melt butter and occasionally defrost something. Actually, these days I defrost in the sink under running water. I also wanted clear counters and a clean line of cabinets.

I don't know how you wouldn't get food smells in your pantry when you are using the microwave there. We use our microwave to reheat left-overs on a daily basis - mostly for lunches, as well as melting butter and cooking vegetables, so we wouldn't want it out of the kitchen proper - but we can certainly "smell" whatever has been warmed up. Of course our microwave is older, so maybe the newer ones keep the smell contained better?

I suppose it could depend on how strong a smell the food you are reheating has, but I can't imagine that the smell of microwave popcorn wouldn't linger! JMHO

I have my microwave in my pantry and I love it. Unike you,I have a large kitchen and large pantry,but I am not a big microwave user and just didn't want to build it in in the kitchen, then have an issue in a few years if the same sized micro wasn't available for a replacement when needed. My pantry is easy to access and I had a shelf built in for it with shelves underneath. I have never been sorry I did this..

We are planning to put the microwave in the pantry to free up desperately needed counter space. We have a small Emerson that is "dorm" size and will fit on a 13" deep shelf. I think it is going to be great and glad to hear others are happy with that set up as well. I didn't have a microwave for 10 years so that is how little I use it and frankly you can do just about everything just as quickly on the range, you just have to wash a pan.

We are planning to put the microwave in the pantry to free up desperately needed counter space. We have a small Emerson that is "dorm" size and will fit on a 13" deep shelf. I think it is going to be great and glad to hear others are happy with that set up as well. I didn't have a microwave for 10 years so that is how little I use it and frankly you can do just about everything just as quickly on the range, you just have to wash a pan.

We also have our microwave in the pantry. We don't have a small kitchen, but I like empty counters.

I haven't noticed any odors from it.

mtpam2, Now that it's been brought to my attention, I agree that it's logical to assume food smells would linger in the pantry a bit. Perhaps the real question is, "Do you mind food smells lingering in the pantry?" For me, the answer is no. I don't mind. My pantry/kitchen will be open to one another -- no door, but a big, open space -- so I think food smells from the kitchen will migrate into the pantry. I can imagine that someone with a smaller, closed-off pantry would feel differently.

ArchitectMama, As I consider it, I think I'd be fine with a dorm-sized microwave. I have a larger one now, and I really don't use it for much. As long as I could fit in a dinner plate (for leftovers), I think I'd be fine with a smaller unit. I'm glad to have thought through this idea. I was just assuming I'd keep the size I have now.

Mary9915, I understand where you're coming from. Although our kitchen won't be large and spacious, we do have enough room to include the things that matter to us -- but I don't want to take up space with things I rarely use. I also like the idea of clean countertops.

I had our trim carpenter build the pantry out to my specs. A table was built on the 3rd wall (based on a garden potting bench I had torn out of a magazine article). The toaster and microwave are on the table top. The thing I like best is having a place to put grocery bags for unpacking. It also provides a place for plate when toaster sandwich or bowl for pouring cereal. All of our food is stored in the pantry (nothing but spices and cooking oils in the kitchen area).

I love my pantry. It holds a lot more than it appears in pictures. The right side shelves are deeper (built over/around an HVAC return). There is way more on the shelves now.

Here is a link that might be useful: my pantry - last 2 pictures

Ours isn't in a pantry, but it's in a hutch. Just another idea, for anyone interested. I love having it behind doors

Doors shut: