I always develop the webiste locally on my machine with the setup mydomain.dev and using svn or git to save versions of the code. The next step is to put it on a test domain like stage.mydomain.com and after that mydomain.com
I use this to change the url:s in the database: https://interconnectit.com/products/search-and-replace-for-wordpress-databases/
Its a search and replace tool that you put in your WordPress root and just run it from mydomain.dev/searchreplacedb2.php