I would use a local installation in IIS. I disable CSS caching while designing so I can see my changes immediately in the browser, I edit CSS and other skin files with a text editor like TextPad or NotePad++ and I refresh the web browser to see changes.
It is not really very feasible to use designer tools because the only way the skin is correctly loaded is when you have a running site because of the way we support multiple sites and multiple skins per site the correct paths to the files can only be determined with the site running, it doesn't work the same as when using static html files.
Hope that helps,
Joe