I've had a barrel stove in the machine shed for 3 years now. It's the "double barrel" kit made by Vogelzang that northern tool Note:Please read the Forestry Forum's postion on this company
It works well. The second barrel adds about 20% or so to the overall heat output, and helps to reduce the heat going up the stovepipe. I welded some racks on the side of the upper barrel for drying towells and such from the barn sink.
When I put mine together, we put a layer of brick in the very bottom of the bottom barrel, covered the bricks with sand, and then put an old fireplace grate on top of the sand. Thus far I've not had any problems with burn-out, and the grate keeps the coals and wood away from the sides of the barrel.
I think that you can't beat them for the money (the stove kits were a Christmas present, but probably cost less than $50.00). Your estimate about the "40" rule is a good one - it gets pretty toasty right next to the stove when it's in use. I usually place a 20" box fan about 5' away, turned on low, with the air stream blowing over the bottom barrel. That helps to distrubute heat around the shop.
A small steel or cast-iron stove may put out more heat - primarily because you can safely build a hotter fire due to the small size and thicker metal. But they cost a bunch more too.