Most -all compressors generate heat. Therefore can't be sealed up. Seen a lot of compreeors moved outside (noise and space) but obviously need ventilation - could vent to the shed - then there is the dust issue you spoke of, if vented outdoors as most are -small tin sheds to keep the rain off. well they end up rusty. Possibly shed vent with free flow (polyfibre? ) dust filtration?:?