By the time you get that shop air system sorted out and the material needed there is a pretty good chance that you have come close or could have paid for a Hobby Aire system seen here
. From personal use, these work just fine. I pulled my fresh air from a cool basement and used a 50 foot RV water hose that I have as the hood air supply - it's quite a bit more flexible then the one supplied.
That Harbor Freight air separator will need a further separator after it as it really doesn't do a good job. I used one of them along with a Sharpe - absolutely no water carry over.
This wasn't the final configuration as I added this pressure regulator and straightened out the plumbing:
.....and it worked for me