nd this won't interfere with the work I am doing on the live site (in Dreamweaver and using FileZilla)? Sorry about all the questions, just nervous of something I don't really know and understand.
No problem. Xampp installed on a usb drive will only serve up files from the /xampp/htdocs folder on the usb drive, so your work on the live site can easily be separated by keeping it on another drive or even in a folder inside /xampp/htdocs/ .
You could then access the test site by typing localhost/testsite/ or your version of the live site by typing localhost/livesite/ (both into the address bar of whatever browser you're using). This is much quicker than uploading the latest version to someone else's server, finding a bug and fixing it and then uploading the next version.
You could also use Filezilla to transfer your files from localhost/livesite/ to the server that shows it to the world.
In this way you could have many websites at the development, production and testing stages on your usb drive.