I usually have the following setup:
1) C# projects for dlls - on local machine and under svn
2) Website files (+ sql database) are on shared server. Locally I create a mapped drive and adding a "Website project" to the solution solution that refers to the website on that network drive.
The website is running on server, so usually I'm goin' through server url if I need to change content. As for debuggin' I gues you can just press F5 in Visual Studio or create a site on your local IIS instance which will be referencing to the same files
on shared server.
Daily backups of site+database rather than svn
3) Reusable parts I'm wrapping up into packages and keep them under svn.
I've used this approach on a few projects, 2-3 devs at the same time and that worked out well.