That should work although I would not advise it (it's not clear to me that git works properly with identical folders on different machines; that's not really how version control is supposed to be set up). Is your whole web2py directory in your Dropbox folder?
I'd recommend getting on Bitbucket or something if possible. It's a little more clunky because you have to explicitly push and pull. But might be worthwhile in the long run.
