Briefly put, if you have a MongoCollection and call EnsureIndex() followed by DropCollection, followed by the very same EnsureIndex() call the index is not created the second time. Executing the following powershell script twice from PowerShellISE will demonstrate this:

https://gist.github.com/982750

This is the sort of error that would only occur in an interactive shell (e.g. powershell IronPython, etc), or perhaps as part of an ETL process.