I see that junctions are a common way of referencing shared code in many projects. However, I have not seen them used in web applications before.
Our team is exploring
In case with virtual folders you need IIS installed on each environment. However with both approaches you need to manually maintain all references after each change (For example situation when someone added one more reference), which is not convinient.
Consider using VCS with referncing system. For example SVN with externals. In that case you will have: