I've done that a couple of times in the past, but I always either found it was easier to work on my site directly (SmartFTP's Edit feature) than work on it locally then upload it, or that I would fiddle with the config and break something. Also I've found that having a web server installed on my PC slowed it down a bit too much for my liking.
The only advantage that I can think of is it lets you test out major changes. This could been an advantage to me a couple of days ago when I tried to upgrade the version of Joomla on Earthtime Games. Something went wrong and I spent a good couple of hours today fixing it.
But now it works. Yay!!