Would it be quicker to make wordpress theme direct on FTP? Because client want to see the progress and if I will work on local XAMPP then it would not be possible to update any changes quickly.
How to setup theme development environment with any free and lightweight IDE for windows XP?
You have a lot of choises:
A plugin for your IDE to automatically upload your saved files to FTP.
Open your local server to the world using something like no-ip and few router configurations.
The least AND the worse, edit your files via FTP as you said using some FTP Client that allows it like Smart FTP (paid) or FileZilla (free).
All options should work… But for gods sake, don’t upload to production server! Always keep an development server to test the things before uploading do production machine. This is safer to you and you client, trust me.
A great free (and heavy) IDE for Windows, MAC and UNIX is the Eclipse.
A lightweight and free IDE for Windows is Notepad++.