If you want to refresh your databases do just that. Make backups of your
content DBs in production. Detach your content databases in your dev
environment. Restore your DBs to dev. Reattach them.

If for whatever reason you don't want to do that then backup and restore is your
next best option. It's a lot more work though. The database option is much
better.

Will that get both content and configuration databases?

It'll do whatever databases you back up and restore. I haven't done this much
with v3, but I don't think you want to bring the Config database over, just the
Content DBs. In v2 the Config DB had hard coded server names that could really
cause you problems in Dev. The Content DBs have all of your content, so you'll
be fine just bringing them over.

Just the content databases.

If you need the SSP databases, that is a whole different world.