You are going to make the most inefficient space into an occupied space, so you need to insulate all around the room. Just insulating the door will not be enough to begin calling the space efficient in terms of saving energy. Insulate the whole room to new building standards. Then install a highly efficient system to the heat load calculations of the room.
Gas and oil heat is 1/2 the cost of electric or propane in most areas. After that, the simplest installation would be to attach a packaged high-efficiency heating/cooling unit right outside the garage and short-duct the system into the garage. A slightly more efficient setup at reasonable expense would be a direct-vent furnace and a ductless cooling unit.