Update October 2016: Easiest now: use lvh.me which always points to 127.0.0.1, but make sure to verify that this is still true every time you need to invoke it (because domains can expire or get taken over, and DNS poisoning is always a concern)
Previous Answer:
Since the callback request is issued by the browser, as a HTTP redirect response, you can set up your .hosts file or equivalent to point a domain that is not localhost to 127.0.0.1.
Say for example you register the following callback with Twitter: http://www.publicdomain.com/callback/. Make sure that www.publicdomain.com points to 127.0.0.1 in your hosts file, AND that twitter can do a successful DNS lookup on www.publicdomain.com, i.e the domain needs to exist and the specific callback should probably return a 200 status message if requested.
EDIT:
I just read the following article: http://www.tonyamoyal.com/2009/08/17/how-to-quickly-set-up-a-test-for-twitter-oauth-authentication-from-your-local-machine, which was linked to from this question: Twitter oAuth callbackUrl – localhost development.
To quote the article:
You can use bit.ly, a URL shortening service. Just shorten the [localhost URL such as http//localhost:8080/twitter_callback] and register the shortened URL as the callback in your Twitter app.
This should be easier than fiddling around in the .hosts file.
Note that now (Aug ’14) bit.ly is not allowing link forwarding to localhost; however Google link shortener works.
PS edit: (Nov ’18): Google link shortener stopped giving support for localhost or 127.0.0.1.