SharePoint development can be quite painful as most anyone would recognize. The Visual Studio extensions for Windows SharePoint Services is a fantastic step forward in SharePoint development that you are going to want to be familiar with. While not mandatory, the VSeWSS streamlines some of the development process and life cycle when building any custom components for SharePoint 2007 or WSS 3.0. VSeWSS has been around for a number of years, but the newest edition (from March 2009) provides several great enhancements.
After you have the file download (check out the Release notes for pre-install recommendations) you will want to simply install the .exe alongside Visual Studio 2008 and you are good to go. This is assuming of course that your local machine has an instance of WSS 3.0 installed already. Normally, I setup a Virtual Machine that would have a standalone version of SharePoint installed. You in fact, can install SharePoint 2007 without Active Directory, check this out:
How to Install SharePoint without Active Directory (i.e. no Domain) – http://www.jeremytaylor.net/2009/04/24/sharepoint-installed-without-active-directory/
After your up and running with SharePoint, VS and VSeWSS, it can be quite a bit of learning curve to get yourself onboard with developing in it. Channel 9 has some great resources for ramping up that you should check out:
Part 1: Introduction to VSeWSS 1.3 – http://channel9.msdn.com/blogs/kirke/sharepoint-for-developers-part-1-introducing-vsewss-13
Part 2: Working with Features – http://channel9.msdn.com/Blogs/kirke/SharePoint-for-Developers-Part-2-Working-with-Features
Part 5: Custom Content Types, Fields, and Lists – http://channel9.msdn.com/Blogs/kirke/SharePoint-for-Developers-Part-5-Custom-content-types-fields-and-lists
Part 6: Custom Web Services – http://channel9.msdn.com/Blogs/kirke/SharePoint-for-Developers-Part-6-Custom-web-services
And that should get you started in VSeWSS 1.3 and SharePoint 2007 custom dev!