They aren't silly questions. There are a number of ways you might want to do this. Personally what I do on Craft projects when I've used Foundation is use the SASS only version which has directions located here: http://foundation.zurb.com/sites/docs/sass.html
You'll need to be familiar with NPM or Bower and Gulp to get the most out of that. If you're not familiar with them, do some reading there first. I stick exclusively to NPM since I have some other projects that I use Node for as well. This is up to your preference.
I do my local install of Craft in my new repository, set up environment variables and then install on dev/production servers as well. If you have a deploy process to install, I normally do that next so I am done configuring servers. Then I will install any npm packages and set up my gulp build process. I recommend using a lot of the same packages they have in that project like
browser-sync. I am surprised I don't see
autoprefixer in there which I feel is essential.
- Should I on my local machine install Craft, and change Foundation to build to that location?
Yes but when you install Foundation via the method I mentioned above, it will build wherever you set it to build in your Gulpfile.
- Should I install them alongside each other (i.e. install Craft in the same folder as my Foundation)?
I would not install the Foundation files in your Craft folder. This could make updates tricky. The core files will be in
node_modules folder in your root anyway. When you locate your SASS files to build, I normally put those in public in their own folder at the same level as the compiled CSS. You don't have to deploy them to your server but it's helpful in local.
- Should I make a fresh installation of Craft somewhere else, and install Foundation within the Craft structure somehow?
I think the above info probably answers this. Basically all Foundation related content I locate in the public folder wherever you want to locate your assets (sass, js, images, css).