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You can buy a proper silencer which drastically reduces the exhaust roar.That's exactly how I use my 5kw £100 Chinese diesel heater on my 27 feet sailboat. I stand it on a sheet of 18mm ply to stop the exhaust from scorching the grp and have a spare washboard with a 4" hole cut in it for the flexible ducting pipe to go through.
A few points though. You don't have to run it at 5kw, I think that you can run it as low as 2kw. You have to make a waterproof covering for the unit as the 12v connections outside are exposed to the elements. You have to run a cable from the unit to your 12v supply and they take quite a lot of electricity, 50w. And they are quite noisy. OK if you have the anchorage to yourself but if there are other boats then they won't thank you.
Fumes are not a problem, especially with the washboard in. Any CO causing restriction in the air supply becomes immediately apparent, try putting your hand over the air intake and you will see what I mean.
I fitted one to my Chinese heater along with a proper skin fitting.
Installed properly they are very good.
Just bin the exhaust that came with it.