I might not have been clear with my original question.
Can I develop a wordpress site in the root directory when there is a production wordpress site already running in that directory.
My impression is that when I install a fresh version of wordpress it will overwrite the current files.
I think ClaytonJames’ post answers my question. The reason I wanted to develop the new site in the root directory is so I wouldn’t screw up when I moved the files around. I have a feeling I’ll have to follow instructions … carefully!