Therein lies the answer then slarty, setup one server box, setup DNS for it, and configure it as a vhost box. Then give file share access to each dev on this box locked to a directory with their domain accounts, and point IIS to those directories for the vhosting. Your devs can have local admin access so the software can do what it needs to to that one box, and they could access their results at the appropriate resolved URL. This is how we did all our development, for a few security reasons.
It can be done so as to present little difficulty to the developer, and should help ease your security concerns.