Best way to edit Templates/Themes

Kahil is right. There is no “best” way to do it in the Theme Editor. It is not even a good way to do it – especially if you want some major edits. I consider the Theme Editor useful for small typos and stuff like that, not for making serious changes to your theme.
Another testblog or a local install is the way to go.

Which other “categories”? Other than style.css? None of them are categories.
And no, not copying over – edit in notepad and FTP. To be able to edit in THeme Editor you have to change the permissions on the template files which makes your blog totally vulnerable to hackers.
And I think the best thing for you would be to start here:
http://codex.wordpress.org/Blog_Design_and_Layout

You are mixing things here, my friend.
Why should you use the Theme Editor on a local install? You edit the files on your computer and you see the result instantly. Don’t you?
A decent editor (Notepad++ or PSPad) is much better than anything else: they have code highlighting and a lot of goodies 🙂

I provided that link exactly because I realized you don’t understand (yet) the theme system used in WP. Browse the Codex, read about the Themes and Templates, how they work together etc.

You said you have a local install – for me that means a XAMPP (or something similar) on your computer and a live WP blog locally.
Now opening a template file (e.g. the sidebar.php) of the local installation in a text editor and saving the changes will give you the possibility to see your changes immediately (by hitting the refresh button, of course).
You don’t need to get the “source code” into the Notepad or whatever you are using. Like in any program you go > File > Open > find the template file of yopur local install and open it. Edit it. Save it. See the result.

This is NOT WP-specific knowledge… If you use any kind of editor, you have to be able to find a file on your computer to edit it.

I have (MSN) but only my son can have it.
The forum is the way to get support.

Look, if you don’t know html, you don’t know how to edit a file, you don’t have a local install – then why on the earth would you want to mess around with your theme?
(If you see gibbberish you do NOT have a local installation, you just have the files on your computer.)

To be able to edit a WP theme you will have to know a bit more the basic HTML and CSS.

I don’t repair my car because I don’t know what is under the hood. It is the same with code.

Go and start here: http://www.w3schools.com/default.asp

I agree: there was a point when I didn’t know anything about HTML. The difference is – I didn’t want to modify a complicated script on my first day with HTML. I went and learnt the basics first…

It’ll be years before you can work on your website if you try to read the entire Codex and W3schools. Much better to just dive in, and learn as you go, that’s what everyone does. Just keep those documentation websites handy, and read 1 section at a time when you have a specific task you’re working on.

Instead of the built-in theme editor (which also works), you alternately can edit the Template files (such as Sidebar.php) simply by opening them with Notepad or WordPad. You’ll find these files inside your /wordpress/wp-content/themes/ folder. Moshu also named Notepad++ as an editor-program that highlights the code in different colors, which makes it easier to understand. When you click Save it saves in the same format it is in, .php (which can just be viewed as text). Then you just replace the sidebar.php in your /theme/ with the file you’ve edited. At that point your latest alterations should appear live on your site. Check the site after every change, to see if it broke or worked.

One file that you might want to learn/play with, is style.css — you can open and edit it the same way as above. This file contains CSS code, and can change the look of your site in many ways that you’ll learn one piece at a time.

Always keep a backup copy of each file you’re editing.