Here's yet another vote for hooking the sander to the shop vac. It allowed me to sand for literally hours in a closed garage with surprisingly little effect on the rest of the area. One modification I used was to buy a "cyclone" separator from the local Woodcraft store. This allowed me to create an in-line "water trap" to separate much of the dust before it went into the shop vac. This trapped more "crud" and greatly extended the life of the shop vac filter.

Sears sells a small device that plugs into your wall power outlet and has plug-ins for both the shop vac and your power tool (don't go there...:-) ). It automatically turns your shop vac on and off as you use the power tool.

Note: Even with "reduced" dust, I still used a good respirator and serious hearing protection (and shop vac mufflers are a minor help at best).