If the HWH is a sealed combustion unit, it gets it's combustion air through the vent pipe set up, I'd think you would be ok. I agree that the dust in the area might make for a little more maintenance.
The Grizzly online tool for playing with tool location is a good one. I used it and also an easy to use architecture program to model my tool placement. Still redid things once I got them in the shop, but the basic design worked well. Lots of good information on shop set ups here at the Creek. Be sure to do some research if you haven't already.
Anxious to see what you decide! Jim.