Basements are OK, except in cases of floods where the emergency equipment will most likely be compromised when needed most, and also the risks of fire and exhaust leakage into the living spaces. You could fire proof the room with sufficient flame and heat barriers, not much can be done about the exhaust leakage issue except to provide for plenty of extra ventilation to the outside. There is no problem venting your exhaust downwards as long as you remember that the exhaust stream will contain both water and sulphur compounds that tend to become corrosive as a mixture. The moisture will condense when the exhaust system cools to the dew point, and then will flow downhill to the lowest point it can find. Good system design will allow a drainage sump at a low point or will be sufficiently insulated to prevent temps dropping to the dew point before opening to the atmosphere. The noise levels will most likely be felt rather than heard... the exhaust note will be gone with a good pit design but the mechanical noise (diesel knock), and effects of the power pulse will remain. Sufficient insulation will take care of most of that but low frequencies will travel in the mass of the building and surrounding ground. These things are thumpers! Could be soothing to some, very annoying to others.
dieselgman
