I recently came across a really frustrating problem where I had to make an update to a workflow that had been in place for a few months (changing the wording in an email that’s sent out). The strange thing was, the changes never seemed to be applying, the behaviour of the site was such that it always seemed like the “old” workflow was running, even though I had updated it, the wording in the emails were not changing.
I eventually ran across this post:
Which gave instructions on how to clear the SharePoint Designer Workflow Assembly Cache. That fixed the problem.
To clear the SPD activity cache:
1. Close SPD.
2. Open “My Computer”.
3. Go to %System Drive%\Documents and Settings\%user%\Local Settings\Application Data\Microsoft\WebSiteCache (If you are running Vista, that path is different – look for %System Drive%\Users\%user%\AppData\Local\Microsoft\WebSiteCache).
4. Go to a directory that looks similar to the name of the website you were connecting to. (Alternatively, you can just delete all these directories and everything should work when you boot SPD).
5. Delete the assembly with the name similar to the one you are changing.
6. Boot SPD.
7. You can now work with your updated activity.
b3no's development blog 
Thank you so much – lifesaver.
Peter