My favourite way to test restores is to do them frequently to the dev server from the production backups - this keeps the dev data set up to date, and works as a handy test of the restore mechanism. Of course if you have huge amounts of data or files on production this becomes more difficult, but not impossible, to manage.
This works well, though you may need an "anonymizer" (and maybe some extra compliance testing) if your systems have PCI or HIPPA data on them. We have federal restrictions against storing certain types of data on servers outside the US. Cloud computing sounds great but neither Amazon or Google will guarantee the data stays within the country's borders.
