Can you explain some of the dangers. I thought by piping the exhaust and intake outside it would be safe??
1. Exhaust system failure can lead to CO poisoning.
2. Improper exhaust system installation can lead to CO poisoning.
3. Fire hazard from hot engine and/or exhaust system.
4. Fire hazard from engine malfunction.
5. Fire hazard from fueling operations.
(and the list goes on and on...)
An 'indoors' generator should be in a separate building, with an external to the building fuel source (with a shutoff that can be activated in the event of a fire), with an automatic shutoff as it enters the generator building in the event of fire, a fire-suppression system (automatic), and the list goes on!
In short, sure store it indoors, but run it outside, as far from the building as humanly possible (25 ft or more...) I cringe when I see gasoline generators running right next to windows and doors!
BTW, the rules regarding CO are much different for a diesel generator (diesel engines don't create much, if any, CO) but the ventilation and distance rules are basically the same but for different reasons--diesel exhaust stinks big time, so you want it as far from the house as possible.
My diesel generator runs near to the house, but since the exhaust outlet is 10 ft off the ground, with forced air blowing exhaust straight up, I can get away with it. However this is a relatively unique configuration--were it a standard diesel generator set, I'd move it well further away.