When I practice, I don't tie on a fly -- just a leader. Some people tie on a small piece of yarn or an actual fly with the hook point cut off. And, yes, this will damage the leader. So, I just use a straight piece of plain mono for practice.
Here are some tips on "indoor practice" from one of the best casters in the world:
http://www.youtube.com/watch?v=2_e7djaYzyg

