All sounds like solid advice which makes sense to me, thank you! I think the closest I can get to that solution, for time being at least, is putting up a stud wall similarly to how I think you've done it. Keeping a clean end and dirty end.Move the surface grinder and welding table somewhere else. Keep the grinding grit far away from the lathe & mill. I partitioned off a 9x12 at the back of my garage as a "clean" room for the lathe & mill. Put the back of the mill into the corner with the table at 45º to the walls. My space is tight enough that I removed the crank handle from the left end of the mill table to avoid hitting the wall. Place the lathe so you can feed a long bar into the spindle. I placed mine so the spindle faces a door which I can open when needed. A hole in the wall that lines up with the spindle also works. Move the compressor out with the surface grinder and welding area. You will quickly grow tired of listening to it in that small space. Some people build a small enclosure outside with sound-proofing.
Do you think I'll need the compressor on when in the workshop? My main reason for having it, is when I'm working on cars, which would be okay as I'd not be in workshop. when running.