I'm not sure why your localhost version is running so slow, I find my localhost versions actually run quicker than the live website.
I am running various versions, but 1 of them is:
windows XP Pro
SQL Server Express
(This is on a virtual PC so it's running inside another windows XP operating system) - I can run several at once, so it should show that you should be able to run this as a development environment.
This computer is 3Ghz dual core - 2GB mem
Laptop can also handle it - 2.4Ghz dual core 2GB mem
Old Laptop was a P4 2.4Ghz - 512MB ram and was able to run DNN without problems locally in win XP with SQL Server (this was prob. v3 dnn)
As for URLs, the method I have used is:
Find and Replace SQL queries for DotNetNuke
(To fix problems after transferring a localhost database to a live website and other useful functions)
- this may not fix all of your problems but it will give you a starting point, it's mainly aimed at URLs in the text HTML module, but can be adapted.