We do it both ways. Some places we share folders and some places have their own folders that we update.
I have several machines that I need to run tests on but I usually do the work on my laptop with the project folder in my personal network drive so I know I'm getting the tests that I just worked on but maybe don't want to check in to the repository yet.
Our tests that run with the overnight build have their own project folder but we automatically checkout the whole project first and then run the tests so that we always run the most recent tests with the build.
We did all this by trial and error. You can try one way and if that doesn't work for you, just switch it around.
