Definitely gasoline, 2 or 4 stroke. If you get a rear mounted friction or chain drive with a high quality engine, such as the Robin-Suburu EHO35 or the Honda GX35, it will last longer than the $500+ battery pack on an electric, so to me the cost of a high dollar electric will never pay for itself compared to a gasoline engine, as the batteries have a limited lifespan, and cost more than the gasoline engine. Also the range of an electric bike is simply unacceptable if you cannot pedal, which is why I am riding an MB in the first place.
As for where you want to work on it, a bit of background on my situation. I am divorced, with 2 grown daughters, the oldest of which is married. The younger one spends a lot of time with me. She has her own room. But, since I otherwise live by myself, I removed all the furniture from my living room (most of it went to other rooms, while the dining set and a couple of chairs went to Goodwill. I removed the carpet in the living room, and replaced it with 1/8" thick commercial grade VCT (vinyl composition tile), the really tough stuff like they use in stores, hospitals, and some offices, only in a nicer color. There is no furniture in what used to be in the living room. It is now the bike room. I have a Genuine Stella, a Yamaha Vino 125, a Honda Rebel 250, and my MB stored in there, and sometimes bring my Yamaha XT225 and Kawasaki Ninja 500 in there to do work on them. My Goldwing obviously won't fit through the door. I have never had any issues doing this. I only run them in there with them backed up to the front door, and the door open, so the exhaust can go outside. Motorcycles, scooters, and now motorized bikes are my main hobby. I live in the Phoenix AZ area, where summer time temperatures can reach well over 120 in the sun, and 115+ in the shade. It is virtually impossible for someone in my condition (medical issues) to work on anything in temperatures like that. I keep it at 70 degrees F in the summer in the house, so I can work on the bikes where it is nice and cool. I have done this for over 10 years, and never had the slightest problem. All the bikes in my living room, or bike room as it now is, have gas in the tanks, though I do not work with open containers of gasoline inside. If I need to put gas in a bike, or drain gas out, I do take it outside.
But, I am an auto mechanic, and have worked around gas, grease, oil, brake fluid, antifreeze, trans fluid, WD-40, carb cleaner, and a lot of other car/bike chemicals all my life. I come home everyday soaked in the stuff. It has yet to do me any harm. I have seen people put on rubber gloves to put gas in their car, I have taken a bath in it to get all the grease off. Different people are different, and you will have to do what you feel is right. If you feel you can't have a gas powered bike in the house, that is up to you. But they have it all over electric in every aspect except noise. I wish they were quieter.
There is no smoking in my house BTW, I quit over 10 years ago.