My preference is for a wall mounted, direct vent gas unit for a permanent installation. This would require a gas line or tank though. There are also a good many options out there now for portable units - both gas and kerosene. In your location, K1 kerosene in bulk should be available if you went that route. I can buy it out of the pump at Fleet Farm and a couple of gas stations. I'd stay away from running them on diesel or heating oil which is dirtier. http://www.ultimategarageheater.com/

The plastic on the ceiling is a good idea and can also be a wall between the bays. Use the open ceiling bay for a chemical use area. Depending on the garage construction you might also throw it up on the walls for wind whistling through the cracks. Of course if it's like my garage you haven't seen the walls in years! A cheap rummage sale box fan on low can be mounted pretty much in any configuration you might need for circulation or out a window to vent after a "Oh Shoot" spill. Floor covering is nice, I use cardboard refridgerator or water heater boxes. Big, cheap, absorb, disposable. Depending on your floor pitch and drainage, it is subject to soaking up water if you'll be using the other side for an actual car that drives in the snow. CO detector is not a bad idea.

If you worry about such things check your local codes and insurance. Most real codes require an open flame device to be at least 8' off the floor anywhere vehicles are stored. That's why ceiling hung Modines are used in shops.
I'm not sure the barrel of water thing would help much unless you heated it full time. A couple of days of the current weather (+ 2F) I'm sure you're also getting will have you sharing space with a rather large ice cube.