Application Development, Testing, Production

I've searched but haven't found anything so I thought I'd ask. In very broad terms I'm looking for information about setting up a test environment for my developers. They currently have all of the development tools on their computer and do some testing from there.

We recently setup a test web server (100% web apps) but they have been testing with the production database server.

We have plans to have production web and DB servers, as well as test web and DB servers. I'm really looking for the most common process of managing such environment. So here is what I'm thinking:

1. Developers create and manipulate apps on their computers to a point they feel they are ready for users to test the application.

2. Developers put their application in test (aka- pre-production) and let users test it. Working out any bugs along the way on their development computers and moving back to test as needed.

3. Once everything tested fine, move it to production.

I'm sure that's the normal process, now the major questions about it. How often do I move data back the other way. Our lead developer doesn't care about the data (sounds a little odd to me), they've expressed interest in periodically mirroring production back into test.

We're 100% virtual so I'm thinking just delete the test machines and clone the production machines. I will concern myself about duplicate computer names and IPs at another time. This to me doesn't sound like the most effective way. I was thinking of only moving the data from production to test but they've expressed that they don't care about the data...

Thoughts?

PS- I have a meeting in 45 minutes to begin discussions about test labs... Any help before that would be most helpful... :)