Yes, it is allowed and it will work, just make sure it is a root level site in both cases so that the friendly urls created for the events are relative to the root of the site then it should work fine when you change to the production domain.
http://www.mojoportal.com/moving-an-installation-of-mojoportal-to-a-different-server.aspx
Customers should purchase licenses to be in compliance, but there is nothing locked down about my add on products, they don't require any license activation to work.
Best,
Joe