"""... build a little box to put over it. I plan to insulate it to dampen the sound and use left over vinyl siding for the outside of the box. I was just going to drill a bunch of small holes on the underside of the lip of the siding and through the insulation board. My question is am I in danger of my compressor overheating inside such a setup?"""
Yes - for a compressor shelter as you plan to build you will need a fan that runs with the compressor to vent hot air out of the box. Two main enemies of air compressors moisture and HEAT.
