Joomla! cms and testing on localhost

I am now on DW cs5 and have a simple (I think) question. If running mamp, etc with no issues and using DWcs5 (mac) if I set up a Joomla! 1.5 install in my htdocs in the MAMP folders, and then (here's the core of the question) set up my local files in my usual directory on another part of my hard drive, do I need to install the whole of the Joomla install fileset to both my local and also  testing folders? (This question does not arise with previous versions nor other Web Design Software as they have not got the (wonderful!) "Live VIew/Live Code and other dynamic cms facilities available in DW cs5. I am a little confused. It seems to me that the answer must be that for me to edit a local copy of, eg, index.php then ask it to use Live View/Live Code, when it may well need to access other Joomla files in other parts of the testing MAMP server folders means that both local and testing server folders need the full install-especialy with third party templates such as Rockettheme that use the Gantry Framework. Can anyone advise me please? Thank you.