sub domain staging

I'm building a site for someone who has Godaddy hosting and have to build it on a sub domain. I have never done this before. I have searched here but i'm still a bit concerned about moving from sub domain to the root later.

It appears that the databases remain the same paths / accessible for all so I won't have to create new ones. However, this confuses me.

• I will do a second install of CMSB from scratch in the root, correct? 
• Do I export CMSB / backup records from the CMSB sub domain? I also have the the CSV plugs.
• There will be a lot of photos (and I'll be trying the new beta library). Do I just copy these upload folders over and they will be found?
• Or is it better to create new databases or something?
• I don't think the settings file and path options that I see being used when you setup locally so you don't overwrite files apply here. ? I don't ever even change anything in the settings file. Do I need to touch this or set the path options for the dev environment? I don't get it.

Or is there a better way to handle all of this?

Please advise. I've been lucky enough to always use my own reseller account and then just propagate. Everything just works. That or build the site right next to the old one with index-new.php or whatever.