Thanks for the reply dgparryuk,
Wouldn't it be less complicated to keep the two domains I refer to in original post separated? The subdomain terminology is a bit confusing to me and seems to suggest there is a shared mysql database.
In my mind the separate domains would have separate mysql databases which would allow the 'live development site' to freely test without screwing up the database of the main 'live site' for customers.
In any case, at this point, it seems the only 'imminent' difference between your sub-domain approach and the separate domain approach is the extra domain registration cost.
I'd really like to move on this! Is there any other reservations that I should consider?