First I need to tell you how to access Oracle apps from client to come finally to what you need to do :

* we open browser and type ( for instance )
http://oracletest.oracle:8001/

oracletest => is supposed to be your server name
oracle => is supposed to be the domain name
8001 => is the port that the application is active at ( 8000 is for production and 8001 for test => by installation defaults )


SO

to access the server from a client you need to ( for version 11i ) :

* install Jinitiator on the client machine
* seache for the hosts file ( as you said ) on the client machine , open it by a text editor ( notpad or VI for windows ) add the following line to it

196.165.145.124 oracletest.oracle

* the IP is supposed to be your server IP
* open your control Panel on the client in case of Windows client and select English USA - I use it like this because Jinitiator breaks with Arabic Language settings
* open your browser and enter the past URL
* if the Webserver is up on the server and all deamons and listeners are up you are supposed to see the applcation working

I do think that the domain name affects Oracle Apps BUT in your case and hence that you will use the server for development issues I recommend to keep your server as is and to hook your client machines to the server using the same attributes , the server's domain name and the same IP ranges to keep the server using the same attributes as in USA in case you are going to re-send it back after development ends -- this is the easiest way -- otherwise you will be in need to take care of listener , apps server and tnsnames attributes.

Good Luck