I must admit that I feel stupid for not having realized this earlier but I was updating / dual using Unity 3.5 and 4.0 as well when this happened, so I was a little unsure what was causing it, but here goes:
If you access your Unity project on a network share (like: \\server\project\game) then it will run quite well except a small error that pops up in the logs:
UriFormatException: Absolute URI is too short
This is part of the interface that is supposed to link Unity and MonoDevelop together and it is trying to tell you that it can’t generate the solution files (.sln) that MonoDevelop needs to properly integrate into Unity. It’s failure is mainly noticable because MonoDevelop’s intellisense or code complete completely stops working, degrading Mono to a simple text editor and making it very much frustrating to work with it.
If you are unsure if you are having this problem then simply try to use the > Assets > Sync MonoDevelop Project menu. That should instantly generate the error in the logs.
The easiest solution (besides having your project files on your local harddrive) is to map the network share to a network drive and everything will be ok.