I had one located under the bonnet on the drivers side of the Hilux i used to have. I was in Karratha, so it got a good work out with all the beach and rock driving we used to do. Only used it for inflating the tyres afterwards but never had a single problem with it over-heating or getting too much dust in it. I ended up drowning the 'lux (thats another story, with photos) and the compressor was about the only thing that survived.
Got one for the cruiser i now own. Mounted under the bonnet again. I'm running a front locker and haven't had the opportunity yet to do a "real" test on it all. Personally, i think under the bonnet is better, but it's a personal choice. It's higher up than under the seat and when inflating the tyres you get more air to it. Just my opinion...
Gilly