Short answer: I do all prep work by moving from the general to the specific.
I first create a general overview of an area. It is my goal to have a very good idea of what is everywhere, without necessarily having each room, hovel, and tree placed. What I want to know is, "What is this area like, and what lives here? What might be found here? What do the neighbours know about the place? What interesting features are here?"
Ex: I need to know that there are ghoul-haunted catacombs beneath the City of Gaxgy long before the PCs arrive there, but I do not need room-by-room maps of the place until going there becomes a real possibility.
My goal is to have enough information, always, so that I can extrapolate from what I know to what I do not know. I do not need to know how many fleas a dog has until the PCs stop to count them, but I do need to have an idea of the odds that the dog has fleas, and some rough range as to how many they might count.
I also use a ruleset that defines the stats of a normal man, so I don't need to worry about the stats of anyone ordinary -- they are predetermined.
Anything devised "on the fly", as it were, is determined on the basis of that general information. If I know dire corbies live in the caves below the Blasted Oak, then I will use general stats and a prep map if the PCs manage to get there somehow before I am fully prepped.
But I prefer to have all significant areas the PCs might get to within a game session's travel fully prepped before that game session begins. I am usually pretty darn successful in so doing.
RC
EDIT: Actually, one of the problems I am having getting a Doctor Who game going is that it is literally impossible to prep where the PCs can reasonably go within a given game session.