Basically, just follow the
instructions in the manual for creating a new blog.
You'll want to create a separate folder on your server and use that for the test files. You can look at the settings on your current blog to get an idea of the paths to use.
For example, if your Local Site Path for your current blog is
/home/you/public_html/blog
then for your test folder, you'd use
/home/you/public_html/test
where
test is the name of the new folder you created for the test blog.
Just take a step at a time and post back if you have more questions.
Hint: I use the
OtherBlog plugin very heavily in my test blogs, because it allows me to pull entries from my active blogs so I can use live data.