Let me qualify my question with these points:

* There is only one developer.
* The developer is the server administrator.
* The production server is Windows 2008, iis7.5, Sharepoint 2010 Enterprise, and we have a copy of VS 2010 Enterprise, and Active Directory.
* We are too poor to buy another server, but we can purchase a workstation
* I prefer to work from my workstation with a RDP connection to the server.

Some questions I thought of:

* Is there a way to do the development from my workstation?
* Will installing Sharepoint and Windows Server on my dev machine require a second set of licenses, or are the ones I have for production sufficient (and M$ understands)?
* Do I need to *purchase* another license for VS and SP2010?
* Is it preferable use a virtual machine or a real machine?

I found this post, which is related:
[Sharepoint 2010 Development Environment Set-up](https://sharepoint.stackexchange.com/questions/30266/sharepoint-2010-development-environment-set-up)

What I am leaning toward is to purchase a 64-bit system with Windows 7 and lots of RAM and using that for development (right now I am still using XP).

**[edit]**
The idea of using a virtual drive is quite appealing, and it appears that extra licenses must be purchased for that too - but aren't licenses for VS and Sharepoint (and Server) only good for a few installations? With that in mind, it seems a regular hard drive (SSD, as is pointed out below) would be better.