If you want to keep the 'href="/css/layout.css"' part, then yes, you can set up a rewrite rule. You just have to be careful not to redirect anything starting with /testsite (or you'll end up with a loop).
Like (in root .htaccess):
RewriteEngine On
RewriteCond %{REQUEST_URI} !^/testsite/.*$
RewriteRule ^(.*)$ /testsite/$1 [QSA,L]
There, you will be able to access your layout.css file either from:
http://localhost/testsite/css/layout.css
or
http://localhost/css/layout.css