The 4 square is only for testing horsepower through a gearbox, it doesn't act like a dyno.
Depends on what he is using the dyno for. If he's using it to give people a piece of paper says "600 hp at 5200 rpm" then no. But if he wants to use it to load the engine, run it in a bit, check for leaks and bad assembly, then yes. In fact, maybe better for that because dynos generally are not intended for lengthy test times.
edit: should have said potentially yes, it's just an idea of a way to avoid having to dump all that heat, if he plans to run for any length of time.
On the other hand, he could make it a seasoal business and just run the dyno in winter to heat the shop That might not be that terrible an idea either, if he could stockpile enough proven engines to make it through the summer ... or at least use the waste heat usefully part of the year.