Is it possible to extract the various projects from a wsp file to work on say the masterpages, web parts and other custom user controls just like I would in Visual Studio 2010?
You can import your WSP as a project in Visual Studio 2010. This will give you a starting project layout, which you can modify and recompile/repackage.
Simply do New Project and then choose the type for importing WSP (I don't have the exact name handy but it's obvious when you read it :P)
it a cab file, rename it to .zip or register your favorite archive manager.
Then you can view/edit its content.
When you are done, recab it.