I was able to successfully use mklink to create a symbolic link to a folder on a shared folder. I can cd to the folder and I can browse the folder in Explorer with no problems.
However when I double-click on this folder using an application like Word or Excel I receive an error dialog saying: You don't have permission to open this file. Contact the file owner or an administrator to obtain permission.
I checked the security settings and I have Full Control of the link and permissions to the file share. I can't believe that the common file dialog doesn't support a feature of the file system that has been around for such a long time. I did find a report of this problem that was reported in 2007 which was supposedly reported to Microsoft.
The server I'm working on is a Windows 2008 Server Service Pack 2 running the Terminal Server role.