That behavior is so wrong. The arrow keys should move the cursor, not the panel focus. How to fix it?
This is mostly the cause for such breaks - it's a known bug in the IBUS daemon.
Disable iBUS - confirming Mike Krüger's answer.
You can turn off iBUS per page, by right clicking anywhere on an open page (in Monodevelop), right-click > input methods > None.
I haven't had this issue since I updated to Ubuntu 11.04, but I had it in 10.10. There were a few months where I didn't use Monodevelop so maybe an update during that time fixed it?