Hard to tell what kind of hook up you have going on there with the compressor but it looks like you have the hose direct to the compressor?
I would NOT run it that way.... you'd have no control of the pressure and most tools only want 90 psi...
If you plumb any lines -- use heavy wall copper... not iron pipe. Iron pipe rusts insides... copper won't.
If you go to TP TOOLS website -- they will show you several versions of how to run a compressor. They sell "kits" -- but don't waste your time with them... I'm just pointing you to a site that has pictures etc of what kind of set ups are common and they various items and their placement in the system.
BTW --- If you want a simple "dryer".... I use a hose style dryer (desiccant) I bought at the local auto paint store (WESCO)... it just goes in line with the hose off the regulator. I don't do much paint work - but when I do I use this hose style (looks like a 3' long section of hose but bigger diameter).
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