Creating a mirror site

Hello all. I am trying to create an exact copy of my site to be a “playground” where I can play with the design and change things without affecting my live site. Here is what I have done so far:

Backed everything up on live site (database and WP folders).
Created a subdomain “dev.mysite.com”.
Fresh installation of WordPress on the subdomain (verified site was loading and able to log in).
Imported the live database to the new installation of WP on dev.
After the import my site wouldn’t load, so I went into wp-config.php and defined the “home” and “site URL” and that seemed to fix it.
When I installed the new WP on dev I did not use the same username and password as my live site, however after the import I guess the info was overridden and it’s now back to the same username and password as my live site. Is that OK to leave it? It kind of freaks me out, but the URL is going to dev.sitename.com.

My other question is what folders from my live site do I FTP over to the dev site so that my themes, images, etc are there? It seems weird to copy over ALL of the WP files because then wouldn’t that write over the new installation of WP? It just doesn’t make sense to me.

I just want to be sure the way that I’ve done it above will ensure that I don’t alter the live site. Thanks for any advice!