SQL Server can be configured using a trace flag to allow the use of network drives. Trace flag 1807 bypasses SQL Servers checks for network bases drive.

There are reasons that Microsoft implemented the standard checks that normally stop you using network drives for database files. These are because SQL Server is expected disk drives to, for instances, actually garentee that data is written when the drive (and associated firmware etc) says that data has been written. You run the risk of corruption occurring in you database if you do use network drives.

For more information, have a read of http://support.microsoft.com/kb/304261. It discusses the issues and you can then make an informed decision on whether to use this trace flag.