DOH! Do you mean to say that you were using header('location: other.php') ? Or was it a mod_rewrite thing?
Dev boxes rule. The domain or subdomain might differ, but it sure beats putting the dev site in a subdirectory and having path issues. I like to allocate one from the rackspace cloud for around $10 a month.
I also like to set up sites I'm working on here on my office dev box. My prior desktop (dual core machine, 2GB RAM, 2.66Ghz) has been repurposed as a development box and protools LE rig. I have 4 bootable OSes on it:
Win XP for development
Win XP for protools
Ubuntu 32-bit
Ubuntu 64-bit
I can just fire up the machine to one of the ubuntu boots and usually get a site copied via SSH and either rsync command or scp command in pretty short order.
Then, on my windows desktop I edit my HOSTS file so that it points 'devdomain.com' to the IP address on my LAN (e.g., 192.168.1.2).
I also have a Mac with Apache/PHP/MySQL manually installed.
My dev boxes may differ in configuration from the production box. Having an exact copy of your production server for your dev server is ideal.