It's all up to you. I keep my svn version in my home directory, and then the live system in /var/www. I have a script that syncs the two
This way I can check the changes before I put them on the server. Notice that you also have .svn directories from svn. I don't suppose it's an issue having them on the web server, but who knows.
Eventually I would like to move to a release system, so that we don't have everyone updating from SVN and then only support the release system. As is, I try and make it safe to upgrade from SVN at all times.