You have to keep in mind that there is a big difference between soundproofing a room, and treating a room acoustically.
By putting up egg crates/foam up on the wall, you're basically just affecting the acoustics INSIDE of that room. Some frequencies(mostly in the high registers) will indeed be blocked from traveling outside, but low frequencies will travel right through it without even being affected by the padding. Now, keep in mind that your neighbours will mainly be hearing(=complaining about) low end noise, since high frequencies got absorbed much much easier. So using egg crates/foam is pretty much useless(on top of being a major fire hazard).

Your best bet in soundproofing a room is to try and achieve a "room within a room", with a layer of air between the walls to isolate the sound. Now, I assume that actually building a floating room in your garage is out of your budget( or simply not possible), so here's what I suggest that you give a try:

Put up heavy duty(preferably fireproof) curtains about a foot away from every wall. Just doing the outside walls will probaby suffice as far as complaints from the neighbours goes. The good thing about this is that with a proper rail system to hang them, you'll be able to take them off pretty easily as opposed to egg crates.

Anyway, that's just my 2 cents, do some searches on google for "soundproofing." I'm sure there's lots of info out there that's much more reliable than what any of us can give you...

[Edited by SPL on 11-13-2003 at 12:35 PM]