Nothing wrong with it. Sometimes people create version directories and then just create a script on the index page redirecting to the current version. This way you only need to update the current version number and can easily revert.
The reasons you may want to develop on a separate server is in prep for upgrading PHP versions, OS versions, etc. Also if your script have access to the root file system where they are performing delete operations for example. You would never want to run untested database creation scripts, or the like on a live server because sometimes the computer would do exactly what you ask it to
But I am the same way...my software revisions are usually done on the same server. It's way too much hassle to maintain another server unless I am setting up the new server to host the new version.
Of course, my philosophy is also based off the fact that I own and host my own servers so I just connect to the directories locally over the Lan.