i3 is $140, not a stretch from there to a higher clocked and unlocked i5 for $199. And yes, plenty of people overclock their dev boxes. If you don't go nuts with the OC the productivity gains from a 20% faster compile or load add up. I'm not talking about setting an OC record, I'm talking about being way within the engineering safety margins of the chip. Production server or continuous integration server? Yeah, bad idea. Dev box? No problem.
In her case she also uses that box not only as the server but also the client. SSD won't do anything but speed up load times, with any amount of RAM at all the entire server, OS, php and every file worked on will be in the RAM disk cache.
Using the existing desktop advice is sound though. I use Windows in a VM for the few times I need to run Windows on my machine, I don't see how doing the reverse (running Linux guest on a Windows host) would be bad if you have a manly enough desktop.
EDIT: php dev is a single core sort of activity. When CPU is required I saw one core at 100%, other 3 idle. 99.9% idle, but that .1% sometimes takes several seconds!