Obviously Arc is somewhat of an unconventional choice, so you might run into more problems. I'm not saying that to discourage you, just to make you aware of what you're getting into.
You might also look into Clojure, if you want something with more libraries.
But if you decide on Arc, I'd say (as usual) that you can just do development on whatever machine you're working on -- you won't be doing anything heavyweight enough that you need a separate dev machine.
Having not run Arc in production, I'll defer to akkartik's suggestions for picking a cheap VPS.
