Windows Domain Naming Conventions, New Domain

I understand that this is a group of many smaller questions but they all need to be asked together for me to make the right decisions. The post is viewable in 2 categories
1 Networking >> Network Management >> Network Design & Methodology
2 OS>> Microsoft >> Server >> Windows 2003 Active Directory

We have two dns domains Ill call them mycompany.com and myproduct.com
we have fewer than 50 users.
No domain is truly implemented right now, we are essentially starting from scratch.

I have a small experimental domain running now that does not use a real world DNS address (mycompany.local), I have been told this helps with security. Is this true, if so what are the benefits?
I don't exactly want a bunch of computers on my domain that think their address ends in *.local
What are the downsides to using  *.local (or similar) naming conventions?

My users are almost all developers and will use any resource they have access to for testing, development etc. Obviously once all of our systems are on a domain it will be easier to finely control access but should I go the extra distance and create sub-domains for [workstations/developers] [infrastructure] [production systems]? Would this increase or decrease my headaches in a small environment such as mine?

Soy