Lets take your questions one by one :
Is it possible to do the following:Have a copy of the database on the same SQL Server Instance
Yes it is possible. You just have to restore the database
e.g. Provided you dont have secondary data files, below will work
-- find logical names
restore filelistonly from disk = 'path\main-db.bak'
restore database main_db_copy
from disk = 'path\main-db.bak'
with recovery, stats = 10,
-- below logical data and log file names will be found from the filelistonly mentioned above.
move 'logicalDataFileName' to 'PhysicalPath\main-db_data.mdf',
move 'logicalLogFileName' to 'PhysicalPath\main-db_log.ldf'
Create a new empty database
No need to first create an empty database, as the
restore with move will create it.
Restore the database from main-db.bak file and not overrite anything else that may be using the same data MDF and LDF files?
Same as above. As
restore with move will not over write unless you use
restore with REPLACE explicitly to overwrite.
Or would it be easier to reproduce this database from a live running database copy so that it is not needed to restore if from backup?
Cannot understand what you mean by this ! If you want to create a new database or copy of the current database , you have to take a backup and then use
restore database to restore it.
Is it mandatory to rename the LDF and MDF files when the database is restored, can I script to automate the majority of the work?
If you want to overwrite the existing one, then no. If not and you want to create a copy of existing one, then Yes - you have to rename the mdf and ldf files.
You can fully automate the restore process. Some examples can be found here and here.