The tool for the SharePoint developer’s virtual m/c are following,
Sharepoint Designer 2007 and SP1
Visual Studio Extension (Only install after installing visual studio 2008)
Web Part Template
IE8 Developer tool
Firefox Addon
Google Chrome
Windows Safari
Fiddler
TracePlus/Web Detective(Spirent Edition)
IrfanView
WSPBuilder
SharePoint Inspector
lutz reflector
Microsoft VHD for Sharepoint 2007

Few articles on setting up MOSS developer’s environment,

Microsoft Article

http://msdn.microsoft.com/en-us/library/bb330848.aspx

http://msdn.microsoft.com/en-us/library/bb428899.aspx

Video on Developer’s machine,

http://wmod.appdev.com/a365/o2/AD/DEMO/LDNN/SP7C/SP7CLDN18B.wmv

Other articles,

http://dotnetaddict.dotnetdevelopersjournal.com/sharepoint_dev_environment.htm

http://blogs.microsoft.co.il/blogs/adir_ron/archive/2007/05/13/Setting-Up-a-Development-Environment-for-the-MOSS-2007.aspx

http://weblogs.asp.net/erobillard/archive/2007/02/23/build-a-sharepoint-development-machine.aspx

http://blumenthalit.net/blog/Lists/Categories/Category.aspx?Name=Building%20a%20MOSS%20Development%20Environment

http://blogs.msdn.com/jjameson/archive/2007/06/09/moss-development-environment-and-windows-update-bug.asp

When tried to setup OOBT Sharepoint RSS Viewer Web Part I got the following error. RSS Viewer webpart will now only work with Authenticated feeds (default for MOSS) when the MOSS server is setup with Kerberos authentication.

"An unexpected error occured processing your request. Check the logs for details and correct the problem."

I located and opened the web.config of the SharePoint site I wanted to put the RSS Reader webpart into, I added this at the very end of the file ( inside the last tag ()):

Then I got this error below ,

"The requested feed url does not exist."

I then added the port number for the proxy server,

web.config setting for RSS viewer webpart

After adding the port I got a new error shown below,

"ProtocolError occured trying to complete the request. The server returned a status code of : ProxyAuthenticationRequired and the status description is : "Proxy Authentication Required ( The ISA Server requires authorization to fulfill the request. Access to the Web Proxy service is denied. )" "

Added rule in the proxy to allow anonymous outbound traffic from the SharePoint web server. After adding the rule I got the error below.

ProtocolError occured trying to complete the request. The server returned a status code of : Forbidden and the status description is : "Forbidden"

In the rule alow xml file in http protocol and it worked.

References:

http://social.technet.microsoft.com/Forums/en-US/sharepointadmin/thread/85b0a013-8f6c-49e1-b884-c2400d2ee522

http://blogs.msdn.com/adamhems/archive/2006/06/13/629761.aspx

http://www.experts-exchange.com/OS/Microsoft_Operating_Systems/Server/MS-SharePoint/Q_23953578.html

http://www.eggheadcafe.com
/conversation.aspx?messageid=33867421&threadid=33464065

non-OOTB, RSS Web Parts

Enhanced RSS Viewer Web Part (It can connect to rss that requires authentication as well)

http://forums.bluecoat.com/viewtopic.php?f=1&t=7916