I also have PHP running as an Apache module, and I think it's a fine setup. The only configuration ideas I can offer are organizational ones that may make things easier for you in the future.
Apache can be told where to find each module it loads; in httpd.conf there's a section "DSO Support" with a bunch of calls to LoadModule. You ought to have a line like this at or toward the end:
LoadModule php4_module libexec/libphp4.so
The third argument is simply the path to the module, in my case it's relative to the apache base directory at /usr/local/apache. But you probably already know this, the point is that all your modules should be in the same place. And, if you put them in the libexec directory in your apache install (which is the default location), you won't have to change it next time you recompile PHP; because in case you haven't noticed, PHP like to overwrite your httpd.conf when you install a new version.
You're right about the fact that "make" does not produce the libphp4.so file; that won't get created until you "make install". If you compile and install, it will get overwritten. It's a good idea to copy it to another place before you install; that way if the new module doesn't work, you can immediately flip back in the old one whilst figuring out your other problems.
I'm not a linux guru and I don't know what exactly the command "make all install" does. The sequence I've always used when compiling & installing PHP is "make clean", "configure", "make", and "make install". What does that command do exactly?