The demo account sends simulated data, not delayed data. It is unusable for just about anything except to see if your connections are working.
The paper account sends real time data if you subscribe to it and pay data fees. It has all the functionality of a real account except fills are simulated. I believe it's worst case fills as in you have to trade through your price.
Delayed data is unavailable through the API.
There is no built in way to test strategies, you have to write them somehow.
Try http://finance.groups.yahoo.com/group/TWSAPI/ for more info (join group required).
There's no real need to open an account to test strategies if you plan on using historical data. The only testing specifically to IB should be testing your API code.
There are some intricacies to IB's data you should be aware of. It is sampled and only sends updates a few times per second. You won't get 100% accurate data from them. There is only limited historical data available for download.
Delayed data is now available http://interactivebrokers.github.io/tws-api/market_data_type.html
Yahoo group moved to https://groups.io/g/twsapi