How can I set up my system to run a PHP project (Apache or IIS)?
The quickest and easiest way to set this up is to install a package that has Apache (web server), PHP (scripting language), and MySQL (database) integrated for you.
I see people recommending XAMPP and WAMPServer. Myself, I use a professional version called WampDeveloper Pro.
Also which programming environment is suitable to write PHP code (Dreamweaver or something else)?
phpDesigner is one of the better IDEs for PHP.
Komodo Edit has a free version that I've seen recommended.
Notepad++ is fast and clean but is just an editor and won't help you much.
DreamWeaver is the big one.