I finally grew weary of the noise from both my pancake compressor and my big 22 gallon one and broke down and got a Silent Air A20. Pricey, but the best move I ever made, as my neighbors and family are close by my studio and I like to work in the evening. It is also quite compact and is nice to use for jobs outside the studio, in a store or something, because it does not disturb with all the noise. Well worth saving up for, and the performance is top notch.
Prior to that, I ran a 50' hose from the far corner of my yard and kep the old compressor in a shed, with a regulator near my easel on the end of the hose near me. Never tried the building of a box, but I've seen a few and they were just a standard wooden box with a vent-hole. It does help a little, but you can still hear the compressor and it's still annoying and you have to lift/remove the box every time you drain, etc.