What's the easiest way to test new widgets and plugins added to an existing site without it affecting the live site? I also want my client to see my progress before it goes live.

I would setup a test site (on a subdomain or in a directory) and update the settings to not send pingbacks and block search engines. Then either make some sample posts (with unordered/ordered lists, blockquotes/code snippets, etc.) or import posts from the existing site to make an accurate representation of the site.

This way your client can still visit the URL of the test site and see how it will look with the new theme or the plugins you want to test. This is the method I've used when testing new WP 2.7 features.

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You can download a set of sample posts from WPCandy:
Easier Theme Development with Sample WordPress Content — WPCandy — WordPress Themes, Plugins, Tips, and Tricks

I have found XamppLite to be a great tool for setting up a test server.

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