Wombat You can do extensions with that. In fact, one of the big points is to develop locally. You don't develop live, right?
You can use notepad++, or your favorite text editor on your desktop (I use whatever that supports utf-8 without Byte-Order-Mark, and the Unix linefeed for line termination. Presuming you are interested complying with PSR-1 and PSR-2, or other popular code standards.), and even directly edit files in "Shared Folders", you won't even need to "touch" linux to work on your code. Set it up and forget it!
Worried about memory usage? 35-ish MiBs. Never seen it used any more than that.
Aesahaettr Digital Ocean is wonderful. You can not go wrong selecting to use that. I like how cheap it is with huge freedom. So you start out with nothing. You "begin" using their service by picking which linux VPS you want (Personally, I would go with Ubuntu for starters.) After your VPS is done created, you will get the usual credentials so that you can actually use-it. You login via SSH. Now you are free to do whatever you want. You want you web server? Install it. Do you want to install PHP? Then do that. There are a few ways you can do this.
The easy way using these two commands (assuming debian/ubuntu. Hit ENTER after you type in each command.)
sudo apt-get install apache2
sudo apt-get install php5
Congratulations, you have a PHP web server. Drop web pages into the /var/www/ folder (a folder called html might be in there, so you might have to put it in there instead. - For starters, I would use Filezilla
FTP client (click here to AVOID sourceforge crapware). But you will be logging in using SSH, so explicitly tell FileZilla that you want to use SFTP/SSH.)
That's really all there is to it. Using the knowledge you gained from the above "basic Linux commands" link I've posted. Freedom to decide which version of PHP, and you do not have to wait months/years before the system admin decides to finally upgrade. The upgrade command is simple.
Of course you can install other things. Python language, Node.js language, your IRC server, just about whatever that will run on linux. The easy way using apt-get/package manager or compiling the software. (Some are precompiled binaries and all you have to do is UNZIP IT/decompress it and run the script.)
In case you find Digital Ocean or any VPS service really interesting, if I were you, I would spend time toying around with vagrant/virtualbox/puphpet, and try out a few commands to get the feel of what it will be like to manage your own VPS.
IIRC, Digital Ocean stopped supporting Arch Linux. :/ I got into using Arch Linux months ago after moving away from Linux Mint and found it to be a fantastic distro. I believe there are ways to get Arch on Digital Ocean anyway. I remember using a debootstrap on a VPS which allowed me to install Ubuntu the way I prefer.