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Restoring SharePoint/MOSS environment to another server

We are currently backing up all SQL databases in our organization nightly, including our WSS/MOSS CONTENT and CONFIG databases.  

What we want to do is test our restoration process onto another (non production) virtualized standalone MOSS server.....

Is it possible to restore both the CONTENT and CONFIG databases into the virtualized machine so that  everything is restored intact?  

What would be the different in the result if I just restored the content database into the existing MOSS installation?

Please be as detailed as you can be.
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Solution: Restoring SharePoint/MOSS environment to another server

A .CMP file is created using Sharepoint Designer as a backup tool. I'm answering another question where the CMP file cannot be used to restore a website and the original has been destroyed.

All backups or exports are at the site collection level not per subsite.