I have dreamweaver 8 and have looked all over the internet on how to create a guestbook. Is this at all possible? If so how do you do it? I am a noob and need help...

check this link out:

www.webthang.co.uk/tuts/tuts_asp/guestbook/simple_gbook.asp

Thanks

Is there a free testing server site?

Depends what you mean! If you want to set up a dreamweaver remote site the either use IIS or Apache on your local machine or get a free host (your ISP?), put up with the adds but you should be able to aim dreamweaver at it to test your work.

How do you point Dreamweaver at it self to work as a testing server?

check these links out:
www.microsoft.com/resources/documentation/windows/xp/all/proddocs/en-us/iiiisin2.mspx?mfr=true
www.webthang.co.uk/tuts/tuts_server/iis_xph/pippo_xp.asp

Read the links and follow the instructions. You'll learn a bunch.