How should I approach practice tests?

For your Practice Exams, I see at least four equally legitimate options, and I think you should probably use a mix of all four. In the earlier stages of your prep, the learning/review-type approaches are likely better for you. Then, as you gain confidence, you may want to do more practice/dress-rehearsing.

1. Take it for learning. Don't time yourself. Do it with your manuals at the ready, and take it nice and slow, making sure you suck the marrow out of each question. You can even look up right answers question-by-question as you go. If you take this route, it's very important that you never be satisfied that the right answer choice is (B), but that instead you make it your mission to understand why answer choice (B) is correct.

2. Take it like review. One thing I like to do to check that the skills are sharp is stop-time drills. Set the clock to run at 35 min/section, but pause it every time you run into something difficult. Then, write down what's difficult about the problem. Write what you think the answer is and why you think the attractive bad answer(s) is/are wrong. This will give you a real-time assessment of where your head's at, giving you a clearer review process than you could get after the fact.

3. Take it like practice. Time yourself, but with a stop-watch, not a countdown timer. Keep the stop watch face-down, and don't worry about the time (that part's just for helping you know how fast you're actually moving) - instead, concentrate on doing the work to the best of your abilities. At the end of every section, note the time it actually took you to complete the section along with the questions you got right and wrong. This way, you'll get a reading of how much you can do, and a sense of what you need to get better at in order to do it all within your 35-minute limit. (You can see how you could combine options 2 and 3 if you wanted to. You know, for fun).

4. Take it like a dress rehearsal. This method is probably most appropriate to the later part of your studies. If you do it this way (at a neutral site, strict timing, correct break after Section 3), you'll get the most-accurate possible measure of your current scoring range. This can be a useful barometer. If you do this route, then a proper review of your test becomes extra-super important.