We like having our air compressor inside the shop just for a clean install and maintenance. No pipes or wiring going through the wall or floor. The outside of the building always looks better without a "compressor shack" ganged onto the main building. Good air compressors with noise suppression are much quieter nowadays. You definitely want to put some good vibration dampers under the compressor feet to cut down on the noise and vibration. Ours is inside under the stairs that go to the second story with a sink and toilet in the same room. We have a gable end barn style building. The upstairs is all one giant room. It's great for parts storage, a bar and pool table ping pong or whatever you like. It had a man door in the gable end, but we plan on putting patio doors in its place with a small second story deck and a grille. But we are in the same shoes as you about retirement so it might be a while before we make changes to the upstairs. A couple floor drains are nice tied to a common drain by the overhead doors. Good windows for natural lighting and skylights in the second story metal roof. You have the makings of a nice shop with the building you have.