Yes it is a common way of building dnn modules - there is no real need to build a project inside the dnn project.
All you need to do is make sure the project references the dnn libraries.

As for packaging for deployement - again this is not a factor of the dotnetnuke project - packaging of modules is done by creating a dnn manifest.  This can be done from any dnn site that you are testing the running module on.

Westa

I highly recommend using (or at least reading the blogs and watching the videos) for Chris Hammon's Visual Studio Development Template:

http://christoctemplate.codeplex.com/

Big time saver for setting up new modules in their own VS project and uses MSBuild for packaging, etc.

---

Steven Webster
Manager, Community Platform
F5 Networks, DevCentral