Thanks for the reply.
I can set it up locally without a problem (!) with a fresh install or with the downloaded files but still need to correct the paths produced. I am assuming if it is set up on my testing server the developer notes would be produced to look for that testing server?
The problem is then the same when it has been developed I would need to upload to the live server but change all the includes to point to the correct location as per my original post. If this is done manually by find and replace then I'm likely to miss something and the whole site would need to be tested again live.
Can I change this globally?