Running on muffs is ok if all you want to do is start the motor and let it idle. It's not good to rev up a motor that's on muffs. If you want to really "test" the motor, it should be in a tank (or, on the boat in the water).
You can put it in gear if you want to check your shifting, but don't over rev it. I do it all the time as that way I know it will shift when I get to the water.
