<p>In Team Foundation Server is there a way to have work items in one project linked to other projects so they show up in the reports in both. We are thinking about keeping release engineering items in their own project and want them linked to the project they are actaully for as well. Is this possible? So for instance I would create the item under release engineering assign it to an engineer and then link it to Product X so it showed up as a work item for Project X as well.</p>

Not out of the box as projects are discrete.  However there is nothing to stop you from writing against the API to fulfill this need, although this would take some considerable work.
Now for the good news.  If you keep your eyes
here
, you may find the answer in time.  As I see cross project reports are planned in
Rosario