There are various rules involved here. First and foremost, you need to be aware of the licensing. If you bought a license of SQL for your server, you are not allowed to install it locally. You can freely install the management studio, but not the SQL Database Engine.
However, there are things you can do...
If your database is less than 4 gigs, and you don't need any fancy functionality, you could install the SQL Express database engine, which is free. A quick google search for "SQL Express 2005 download" should help you find it.
If your database is bigger than 4 gigs or you need the "fancy" functionality, you could purchase a copy of "SQL Server Developer Edition". I don't know the cost, but I am reasonably sure it's considerably less than $100 (US). If you purchase developer, you are allowed to install it on one computer, and ONLY use it for development purpose (which sounds like what you want).
HOWEVER....
I strongly encourage you to get another server and install SQL on there. When developing your app, you should run it against the DEV server (and DEV database). This way you will be certain that it functions properly before implementing on your production server. Some companies take this a step further by having 3 servers, Production, Development, and Test. If you decide to do this, you should regularly restore your production database to dev and test (so there are a similar number of rows in each table). You should also (intentionally) use a slower computer for Dev and Test. This allows you to do performance testing. This can be a little misleading because queries on a slower computer can still execute faster than queries on a busy production server. But... it's better than not testing at all.
Make sense?
-George
"The great things about standards is that there are so many to choose from." - Fortune Cookie Wisdom
