I did basically this for a year, except in my main bedroom (didn't have a spare). You're right to be worried about dust and noise.

For the dust I had a pretty powerful airfilter, but I would still have clouds of dust coming out of my pillow/sheets.

I would have said that general noise during the day was ok in my case, but that was before everybody worked from home.

For chiseling you can actually do a lot without hammering. If your chisels are sharp enough, you can push them through the wood for most techniques. That's what I did when I worked in the evenings.

It helps to have a very heavy workbench that doesn't move too much. Sawing still makes noise though, and planing kinda does too.

All in all, less than ideal, but for me it was great for a while! It really depends on what size and type of things you want to make. Feel free to specify and I can give more details.

I think it makes sense to explore other options as well: renting a garage, finding a community workshop, etc.

Thanks for the thoughts. Were your dust clouds the result of hand tools, or were you using power tools? I’ve mostly used power tools, but my impression is that hand tools might make less of a mess? Hopefully being in a separate room I can isolate things...

That’s good to know you can sometimes get by chiseling without a hammer! At the moment I’m interested in making a Danish Modern style chair, likely in walnut or oak.

If you don't want to dedicate the whole room you could try one of the variety of temporary dust barrier systems like this one: https://www.zipwall.com

As others have said, hand tools generate chips or shavings and less dust than power tools. I strongly suggest doing your sanding outside if at all possible. If not, The recommendation other folks have made for Festool is on point. Their dust collection is excellent. I own a Makita random orbit sander and it leaves a film of dust on the surroundings when I use it. I've used other people's Festool sanders with Festool dust extractors, and it's outstanding. You pay for it, but you really do get what you pay for.

Part of my strategy for keeping dust down is to do as little sanding as possible. I generally try to get a good surface off of a cutting tool (a plane or scraper), and then sand once at the grit I want to end at. Squirrelly grain, or tearout around knots sometimes requires pulling out the sander. Still I try to limit my use of it. If I can spend 5 minutes planing, and 5 minutes sanding, I'm a long way ahead on time compared to spending 5 minutes each sanding at 4 different grits to get the same surface (numbers from thin air, but the principle applies).

Noise is a challenge. You're right that chiseling is not a quiet activity. Anybody who thinks hand tool woodworking is a quiet and contemplative activity should spend a day in a room full of people chopping dovetails and then maybe reconsider their opinion.

All that said, there are a great many woodworkers who work successfully in apartments or other tight confines. Some of them are even married :-)

Use hand tools, when possible.

If not, use Fesstool tools and one of their dust extractors.

I built a wood bed for my truck in the living room some decades ago. And also a clavichord. Hand tools generate shavings, but little dust.

I have a very good collection of hand tools in a large tool chest. And, I have a very solid, large workbench. Both of these look great in the living room when not in use.

Can we get a picture of the clavichord?! Talk about burying the lede.

Fein also makes amazing vacuums and they're very quiet. At least they used to; I haven't been in the space for years.