I am pushing a site live soon and wanted to do some testing using the actual domain on the dev site by going through the host file trick. My question is if I go this route, can I update the WordPress URLs as well? Will there be any side effects to this?
On this note, if I use the host file trick and then change the WordPress URLs I should not lose access to the backend correct?
If you update the URLs in the database, everything will become accessible over that new URL. The admin panel for instance will be on the new URL.
If you were to visit the original development URL, it would see the new URLs in the database and redirect accordingly.
You wouldn't lose access to the admin, it would simply have moved.
Keep in mind, if you do wish to change the URLs, be sure to do so in a way that preserves serialisation.
Further reading: https://wordpress.org/support/article/changing-the-site-url/