Setting up a test wordpress environment…

I am a newbie to wordpress and I am trying to convert an existing site written entirely in html to wordpress. I would like to setup a test environment (www.myhostname.com/test) to test out and configure various settings. Once I am happy with the configuration, whats the best way to make it live? I think for the first run, I would just copy everything under test to the root folder. But for future updates, copying everything doesn’t sound right to me…