My organization used nested web application projects (WAP) in VS2005 and it worked just fine for the purpose of sharing common components across multiple WAP as well as having all the WAPs share the same web.config (and the same session state) that is located in the "Root" WAP. Now that we have upgraded to VS2010 RC the same user controls and masterpages do not work properly with this setup.
C:\WebApplication\SharedMasterPage.master //this contains a method SetText()
C:\WebApplication\SharedUserControl.ascx //this contains a method SetText()
C:\WebApplication\RootPage.aspx //Uses the masterpage's and usercontrol's SetText()
C:\WebApplication\WebApplication.csproj //the root web project's project file
C:\WebApplication\web.config //shared by both web application projects
C:\WebApplication\NestedWebApplication\NestedWebApplication.csproj \\the project file for the nested web application project.
//this page uses the masterpage and usercontrol from the root WAP and tries to call SetText() but cannot due to it not being declared properly in it's designer.cs file.