Virtual Environment or Physical Server
One of the first decisions that you will have to make is if you are going to go with a physical development box or a virtual environment. A physical box will cost more money and has some limitations as it can only have one instance of SharePoint running on it. A virtual environment will probably be your best option for a simple development environment. A virtual machine can be stored on any internal or external hard drive. The setup that I use is actually pretty simple and inexpensive. I use VMware Workstation 7 installed on my local laptop and store all of my Virtual images on an inexpensive external hard drive. In most cases you will just be doing basic branding changes so you do not need anything crazy ...
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