You are not the only person who stores files in a central location.  Subversion is very common for storing files in a central location to keep track of version control and prevent things like sharing violations or version issues.

Is there a way of setting it up so you'd use your normal documents folder?

Out of everything you said, this is what doesn't make sense to me.  Here's my question for you, is there a reason you would want the testing server to be your own local machine vs a testing server that everyone has access to?  I'm curious what you would want that setup.  If you are referring to a tutorial on Adobe.com I believe that is intended for new single users who have no shared environment, SVN or anything else in the mix.

If you do want to go that route, basically what will happen is when you want to test files, DW will pull them from the server to your localhost so that you can serve up the files.  Don't think of it as backing up 2 sites because your testing site should only be used to test the pages.  You should still push from the development server to the live server at the end of the day.

1.  There is no "intelligent" way to do this in DW.  If you select "Testing Server" from the drop-down in the File Manager DW will connect to the testing server and then you can look at local view and put whatever files you want online.  It should be putting dependant files up though.  Open up the preferences, Edit->Preferences->Site and enable the Prompt on Put for Dependant files.  That should enable the prompt.  Just make sure it is set to upload before disabling that window.

2.  If you followed Step 1, disconnect and choose "Remote Server" from the File window to connect to the remote server.  Then look at local view and upload.  You can't push from the testing server in DW only from the local site.