One of my colleagues (thanks Blair) pointed me at this:

http://blogs.msdn.com/eric_brechner/archive/2008/02/01/so-far-away-distributed-development.aspx

Our team is distributed between the US and UK and many of the points mentioned ring true in our experience. Eric stresses the need to maintain as high bandwidth communication as possible.

We try and make maximum use of livemeeting and office communicator and use video cameras with those which makes a huge difference. And, by the way, I've discovered that connecting wirelessly to the newtwork introduces impedance which can really impact the reliability of those channels. Since I've stopped using wireless at home, I find I can trust those tools now.

If any of you have your own experiences of distributed development which you'd like to share, pleas add a comment.