Virtual Machine for testing?

I usually just create a second Linode and test it there, then swap the IP address over to it once it is ready to go.

In the outbound direction, it's not easy getting a disk image from a Linode booting on a "traditional" architecture; the lack of a boot sector, partition table, bootloader, and kernel are all surmountable, but it becomes one heck of a yak-shaving adventure.

Transferring a disk image to a Linode can go better, but you end up with a lot of extra stuff you don't need (i.e. a boot sector, a partition table, a bootloader, and kernel). There's instructions on that in the Library, under the Advanced section if I recall correctly.

I just create multiple virtual machines on my desktop machine using Virtualbox and then use the bridged networking option to test out how to use multiple virtual machines together in a given configuration.

Works well and is completely free. You can also use snapshots so that you can return to previous configurations as well.

Oh just to add to my above post make sure that your virtual machines have a static IP address. This should be pretty easy to configure using your router where you set static IP addresses based on the MAC address of the network controller which is connecting to the DHCP server.