It should work fine.
What .NET version are you targeting? .NET 4 can make the network scenario a bit easier.
But just have the file on a network drive does not sort all your problems out. While the add-in is loaded, the .xll file is locked, so can't easily be upgraded in place. One approach is to have different directories for different versions:
Now in MyAddIn.dna you put
<DnaLibrary RuntimeVersion="v4.0" >
<ExternalLibrary Path="Version1\MyLibrary.dll" />
Now when upgrading the version you just add a new directory, and change the .dna file (which won't be locked). Users loading the add-in again will get the new library, while working users won't be interrupted.
That's one idea...
Anyway, please post back if the network deployment still gives you an error.