Apache File Quesiton

Not sure how to word this, but I have just installed the XAMMP package with Apache, PHP for the purpose of having a testing server. My confusion is the location of the files. I am using Dreamweaver CS3, and all of my sites were in My Douments\Sites. When I was trying to set up the testing server in DW, I directed it to http://localhost. I was pretty sure it was not going to work, and I was right. I then created a folder in C:\xammp\htdocs\ and directed it to there...again no go. Part of my confusion is that if I create a page as I normally do, and it is stored in My documents\Sites\sitename, then there is no file that is then created in the C:\xammp\htdocs\. So, does it make sense for me to simply put all of my local files in the tester server root folder? Or am I going about it wrong? Thanks Gary