Hello Doug
If you use 7micron filter bags, it is better that the dust collector + bag be outside your workshop.
Fine dust from Hard Wood or MDF are toxic. Some people are more allergic and land in hospital but others are killing themselves gradually.
I would strongly recommend that you get a MINI Cyclone for your shopvac or dust collector such as the Clearvue New CV06 Mini. That cyclone that follows the design of Bill Penz can spin even very fine dust into the container below it BEFORE it reach the filter bags.
You can even build a Bill Penz designed cyclone yourself. Attached is a spreadsheet where there is a plan but also allow you to rescale the cyclone according to your needs.
More info:
Dust Collection Research - Home