I'd go go for the separate building, but pay very special attention to the walkway/access from the house. The fire hazard in knife work is very real, as is the noise, dust, dirt, etc. Building it exterior allows you many more options as time moves onward. I'd look into a few overhead/garage doors opening into a covered patio area. It takes a little effort to get there, but the point is kinda to "get away" if it's a hobby and to "be away" if it's an occupation. I would not make it too far away, and I'd have a covered walkway, so you could do the "dash" in cold weather.
Cons of having it detached is that climate control is more expensive, but then again, I'm not sure I'd want my home central air system dealing with my shop particles.
Regardless, put in a small bathroom with a toilet, shower and a deep sink.
OH, and since you are building, LIGHTING-LIGHTING-LIGHTING! Put in twice what you think you need and plan for options for increasing it. Also if you think you may ever need to upgrade your electrical service, pull the wiring when the walls are exposed.