For best SharePoint Development practice, please follow these ( as per Microsoft recommendations):

• Development Tools and Techniques for Working with Code in Windows SharePoint Services 3.0 (http://go.microsoft.com/fwlink/?LinkId=123413)
• Working with ASP.Net 2.0 Web parts and WSS 3.0 (http://go.microsoft.com/fwlink/?LinkId=123429)
• Best Practices: Common Coding Issues When Using the SharePoint Object Model (http://go.microsoft.com/fwlink/?LinkId=123414)
• Windows SharePoint Services Developer Center (http://go.microsoft.com/fwlink/?LinkId=123428)
• MSDN Webcast: Essentials of Application Security (Part 1 of 3): Secure Communications (Level 200) (http://go.microsoft.com/fwlink/?LinkId=123430)
• SharePoint Server 2007 Developer Portal (http://go.microsoft.com/fwlink/?LinkID=119449)
• Microsoft Anti-Cross Site Scripting Library V1.5 (http://go.microsoft.com/fwlink/?LinkId=123431)
• Improving Web Application Security: Threats and Countermeasures (http://go.microsoft.com/fwlink/?LinkId=123432)
• Exception Management Architecture Guide (http://go.microsoft.com/fwlink/?LinkId=123433)
• SharePoint Products and Technologies White Paper: Implementing Microsoft Office SharePoint Server 2007 and Windows SharePoint Services 3.0 Solutions (http://go.microsoft.com/fwlink/?LinkId=114834)
• How to programmatically test for canonicalization issues with ASP.NET (http://go.microsoft.com/fwlink/?LinkId=123434)
• Validating ASP.NET server controls (http://go.microsoft.com/fwlink/?LinkId=123435)
• MSDN Webcast: Digging into Server-Side State Management (http://go.microsoft.com/fwlink/?LinkId=123436)
• SharePoint Products and Technologies customization policy (http://go.microsoft.com/fwlink/?linkid=92311)
• SharePoint Products and Technologies Customization Best Practices (http://go.microsoft.com/fwlink/?LinkID=123984)

Also WSS and MOSS SDK are always helpful.

SharePoint: 10 Best Practices For Building SharePoint Solutions :
This is an excellent article for Sharepoint Developers looking to start new project. This published document covers Sharepoint development environment to packaging solution and continuous build for Sharepoint solution using TFS and using WSPBuilder.
Before reading this I didn't knew that one can install WSS on my Vista box. Bamboo Solutions have provided this link which explains how to install WSS on Vista machine and you can continue development on your local machine rather fiddling around improving RAM for your VM.