It seems that Outdoor wood boilers have a reputation of using MUCH more wood to heat a given area than indoor ones because heat is not radiated inside the structure to be heated. Not knowing much about boilers, it seems to me that if OWB's radiate that much heat, the issue is insulation.
Would it be more efficient to build a super-insulated shack 2 feet from the garage to house an indoor boiler and a couple cords of wood?
The OWB inefficiency issue is not with the insulation, and insulating them more would have little effect on the amount of wood that you burn. It is the way that they operate that causes them to run inefficiently. They go into starved air smolder mode between fire modes, and that makes charcoal as the wood stays hot and the wood gasses escape. You cannot just add insulation over them, nor do you want to build a shed around them (though I know people that have done that). They come in an insulated housing, usually sheet metal over foam over the boiler steel. The advantage of an OWB is that they can run for a reasonably long time between loading, as they store energy in a smaller water tank in the boiler housing and in the unburned wood. You can also burn any wood in there (wet, green, dry, pithy), and you do not need to split the wood that goes in them. Not having to split wood was a HUGE advantage. Also you do not need a separate water storage tank using them. They can also be installed pretty much anywhere outside and take up no indoor space. You can also split the lines and run multiple pumps to heat various types of things, like garages, hot tubs, DHW, space heaters, greenhouses, hydronic home floor heating and concrete walkways, pools, or whatever. The other advantage is that they are outside, and so the wood, smoke, ash, etc. is all outside, and they do not incur a liability for fire insurance.
Now that said, many states do not allow older style OWBs to be installed and they require newer EPA approved ones only. In your case that is not an issue though, and older OWBs are half the price of newer EPA ones. Newer EPA ones are basically gassifiers, and they require that you burn only well seasoned dry wood. They are more efficient and smoke less, but there is much controversy as to how efficient they are.
I designed and retrofitted a classic style Central Boiler OWB into my ex's house that had an electric hydronic floor heating system and an electric DHW. I used a single loop of 1 inch PEX and ran the line to a hydronic floor bypass loop Hx and then to the DHW Hx. It worked as designed, and basically paid for itself in about 4 years of use. We were also able to keep the house a lot warmer with the OWB than with electricity. It ate about 10 cords of wood a year, but the ex has vast acres of timberland to harvest firewood from, so she has a lifetime supply of firewood for free (well, labor and gas money). Fire insurance was not an issue, as it was detached from the house by a little over 6 feet (all you need in Oregon for fire codes here). We found that loading the boiler half full more times a day (usually twice) was more efficient, as the more wood you put in them the more charcoal is made before it actually burns. Wood gassifiers with a storage tank are more efficient as they burn all the wood at once and store the heat in water. However, they require an insulated storage tank, and they need to be fed dry seasoned wood. There are also many issues with systems like the Greenwood and others with bricks cracking and the like.
We chose the smallest classic CB OWB as a compromise on price, quality, good company reputation, good sales rep, size, fire insurance issues, existing heating systmes to retrofit, availability, and safety. They are open loop systems so if they boil over, that's all they do. Water and steam gush out, the steam takes away the excess heat, and that's it. Nothing else happens in a boil-over. They are UL approved. Yes, they eat wood. No, they do not smoke nearly as much as claimed, and actually they smoke a lot less than a typical pre-EPA wood stove. Usually they only smoke for a few minutes when the damper opens and they go into burn mode. At full fire and in closed damper mode, they hardly smoke, if at all.
