Re: Is it okay....
To me, garage downstairs, mom upstairs is really no different than my daughter's bedroom being upstairs and me being down in the kitchen right under her bedroom making lunch. So the dynamics of child in one room and mom in the other not a problem for me.
In terms of the garage itself, I would want to to be insulated and/or climate controlled, with the door to the outside closed, just like I would expect the front door of a house closed.
As far as still sleeping in the car seat, that doesn't bother me in the least as for the first two weeks of DD2's life, that was the ONLY way she would sleep. I suspect we had some undiagnosed reflux and she wouldn't sleep unless she was at least partially upright.
IOW, if the garage is more like another room in the house and less like a detached garage or shed, then I think it's fine.