I have upgraded to MVC3 and Razor, everything works fine. However, in my return View(model);
the \"View\" is red and VS2010 will helpfully suggest I generate a view
If you can create a new ASP.NET MVC 3 project and add a Razor view as expected then the project where you are seeing this behavior is missing the ASP.NET MVC 3 project type guid, which you can find in a new ASP.NET MVC 3 project's .csproj file. If you can't do this than you should try reinstalling the ASP.NET MVC 3 Tools Update.
These are not explicit answer but rather a list of actions that you could try..
<ProjectGuidType>
are set to <ProjectTypeGuids>{E53F8FEA-EAE0-44A6-8774-FFD645390401};{349c5851-65df-11da-9384-00065b846f21};{fae04ec0-301f-11d3-bf4b-00c04f79efbc}</ProjectTypeGuids>
ProjectGuid
to some other Guid (last post). You will need to update the sln file or simply recreate the solution.