Obviously, losing the ability to deploy to and test on an actual device was of concern. After a few worried minutes involving restarting the software (Zune & Visual Studio) and rebooting the phone we resolved this issue by rebooting the PC. Panic over.
Hopefully knowing that a reboot may be required may save someone else a bit of time.
* I have a separate machine running the Mango SDK RC which wasn't affected.
Are you a Windows Phone, Nokia-X (Android) or Asha developer? If so, you could be getting rewards for the apps you build and the success they achieve by joining the DVLUP program.