It's pretty much been proven that the Hero's Shade is the Hero of Time from Oot.
Actually, there is no proof in the slightest. There isn't a single in-game mention of a connection between the two. Not a single one. However, the theory itself is a popular one, but theories are theories, and as accepted as they may or may not be, they are not facts until proven.
In any case, I don't really think the Hero's Shade will be mentioned at all in Skyward Sword. I think he was kind of just thrown into TP without any real development, mainly to be used as a cool-looking way to obtain new skills. Perhaps a similar character will aid Link in the same way in SS, or maybe the Skyword Sword itself/herself will fill that role. I don't think that the Hero's Shade will live anywhere, though. Really, the Hero's Shade isn't even actually "alive", so it doesn't need a place to live at all.
Additionally, the castle in the background in the Hero's Shade scenes is the same Hyrule Castle model used in Twilight Princess:
http://img40.imageshack.us/img40/1774/image53w.jpg
The only difference in setting is the fog, meant to give it a more ethereal feel. Really, the warp sound and everything pretty much hints at more of a philosophical and psychological way of teaching and learning. Link isn't actually there, it's sort of a "different plane" or "mental phenomena", if you will. The Shade doesn't
live there, moreso, he dwells on that plane.
There will very likely be no connection between SS and TP... remember, TP was aimed at a larger audience whereas SS is said to be aimed at the core Zelda audience (or so I read, I could be remembering wrong). In any case, the only connection I can see them trying to implement would maybe be a telling or display of the whole interloper incident, but experience with Zelda games tells me Nintendo would much rather leave that gaping hole in Zelda history in tact rather than fill it with something that makes sense. Go figure.