I don't know what prolific authors of favelets/bookmarklets do when they code them, but I find the process rather annoying. Having to strip out all newlines, and preferably all extraneous whitespace (for the sake of shorter URLs) gets tedious when revising a script that's more than a few lines long.
The contents of your .js file should obviously serve as the standard input of the script, and for maximum efficiency (on Mac OS X) its output should be piped to
pbcopy so that it can be pasted into a browser's location bar for easy testing. The length of the favelet is also printed, since some browsers impose a maximum URL length.
Not quite a favelet IDE, but it certainly makes life easier.