I would like to start developing my cocoa app on two different machines. I'm not sure of the easiest way to achieve this, but was considering using my dropbox folder. Will xcode be ok with this? Is this a common approach and does it work well? Are there some common 'gotcha's I should look out for?
As mentioned in the comment above, I'd suggest you use a version control system like git.
Also, keep in mind that app store distribution signing can fail mysteriously when the project is located inside a Dropbox directory. I made this mistake when I released Textual and keep paying the price every time I cut a release.
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