An intake muffler (baffled airbox), baffled enclosure, and muffled exhaust will make for a much better working environment.  The intake and exhaust will go a long ways to quiet it, but there will be some mechanical noise due to the nature of a diesel engine.  A wooden enclosure will knock down most of the noise-  something like 3/4" fir plywood and a 2x4 frame, with baffled passages for air circulation.  Be careful in the use of foam or foam rubber-  both are highly flammable.  There are some types of foam rubber that are flame-retardant, but they are expensive.