Bug: SDE connection information is not preserved in an MXD if a Universal Naming Convention (UNC) path is used
Map documents reference hard-coded paths to ArcSDE connection files in situations where data is added via a UNC path from a shared network location. As a result, layers within map documents become unsourced if the .sde connection file is renamed or relocated.
Conversely, ArcSDE connection files that are shared via a mapped drive letter do not exhibit this behavior.
This issue has been fixed in ArcSDE 10.1 and in ArcSDE 10.0 SP5.
The method in which the ArcGIS client is referencing the .sde connection file is different for the UNC folder connection, which causes the direct path to the .sde file to be sourced.
When the path to the location of the .sde connection file is changed due to conditions such as permissions being changed or the folder having been moved, the layers within the map document become unsourced and reference the direct path of the original .sde file location.
Layer Properties of the hard coded source to the original location of .sde connection file.
Use a mapped drive letter to the remote server within the ArcCatalog folder connections instead of a UNC path. This embeds the connection properties within the map document correctly instead of referencing the .sde connection file location.