This question is related to another on which I believe was never properly resolved.
http://forums.microsoft.com/MSDN/ShowPost.aspx PostID=158316&SiteID=1
I have the same problem with using the C# Browser Object from a project file that is stored on a network drive.
The workaround was to store the projects folder on a local drive.
I need the resolution and not the workaround because my data and projects are stored under my documents which is a redirected network drive on a W2K3 for SBS server that has routine backups of my documents content.

Security Exception Was Unhandled - Projects Stored On Network Drives
SecurityAdmin
Haven't tried it myself, but I believe this is caused by the default .NET policies forbidding code execution from network drives. Open up mscorcfg.msc (located somewhere in the .NET SDK I believe), go to Runtime Security Policy -> Machine -> Anything with LocalIntranet. You need to fiddle with these settings somehow (don't ask me how) to get network drive compilation working.
Gino Rojas Tillemann
Didn't work for me. any other cluese...
Alexander75
Thank you for your reply.
Your mention of enabling network drive compilation lead me to search for security settings while the .Net SDK was downloading.
I am not certain of the specific security settings that are required for this type of application but I have discovered that enabling "ClickOnce Security Setting" and checking "This is a full trust application" from project menu -> project properties -> security tab permits the application to run without the security exception.
UPDATE:
After enabling Dynamic Help in the VS C# 2005 EE IDE and clicking on the WebBrowser control the Dynamic Help listed a link for "WebBrowser Security". Viewing this link states that the WebBrowser control is designed to work in full trust only.