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hugo7
I'd go for the shed conversion. I went a slightly different route, buying a shed for the purpose of converting into a cheaper alternative to the garden studio we couldn't afford or accommodate.
Main intended use was as a practice room for my wife's cello, so I put in acoustic plasterboard on walls and ceiling, packed acoustic insulation between the 'studs', laid underlay and carpet and double glazed the perspex windows. Junked the flimsy doors and built a great ugly slab from stud timbers and plyboard. Had an electrician hook it up. All in, probably cost c. £750 on top of the cost of the shed, including a few necessary tools and sundries.
Soundproofing is not bad, but it also seems surprisingly well thermally insulated - cool in summer despite a double glazed south-east facing window and holds on to heat (from an oil radiator) when it's cold outside.
It now pulls three duties as wfh space for me, practice room for my wife and playhouse for junior. I don't actually like working in it because it's a bit too spot on sitting inside a great big metaphor for all my failings in DIY/life, and that's not great for my mental health. But a modicum of competence in the build would get you round that!
Interested to see what you do.