Circular dependencies

Absolutely not. Circular dependencies are a indication of bad design. I don't mean to be harsh. There are some ways out of this.

1) You can refactor common code to another project, say Project#0

2) You can fix your design, which is probably the way to go.

Uncle Bob has a good article on Packaging Principles which includes the Acyclic Dependencies Principle. http://www.objectmentor.com/resources/articles/granularity.pdf. Read this to know why cyclic dependencies are a bad thing.

Refactor your projects to take the common elements out into a "Project #0" which both Project #1 and Project #2 reference.