I wrote a game engine in C# a couple of years ago as a demo for a
research project. It was using axiom3d for graphics, openAl for audio
and ode for physics. It worked like a charm in mono if you had an
nvidia card. At that time, the Realmforge project was moving on pretty
quickly. Realmforge was an opensource game engine, with a game editor
written entirely in C#. I met the leader of the project at the serious
game summit last year and it seems that the project was interesting
enough that they got bought out by another company. They stopped the
development of the opensource project and kept going the proprietary
way.
There is definitely a big market place for an opensource game engine
written entirely in C#. And most of the pieces are already there, they
just need to be sticked together.