I have to deal with this kind of stuff at work from time to time:
Three obvious souces of noise from an internal combustion engine.
1) Exhaust: put a better muffler and resonator on it.
2) intake, put a good sound baffle on it to quiet the intake noise, or rout the intake to a place where it would be baffled.
3) mechanical noise from gears, bearings, etc. Not much you can do about that except to build a sound deadening enclosure, but proper cooling and breathing is counter-productive to sound deadening.
You can put insulated walls around it and keep it open on the top, that would allow noise to go vertically but not horizontally. Gotta let it breath tho.
McMaster carr has some sound deadening products, not sure if they'll meet your needs but it's worth a look:
McMaster-Carr