NOTE: This answer applies to .NET 4.0 only.
The colon character is a literal and needs to be wrapped in single quotes:
duration.ToString("mm':'ss")
From the MSDN documentation:
The custom
TimeSpanformat specifiers
do not include placeholder separator
symbols, such as the symbols that
separate days from hours, hours from
minutes, or seconds from fractional
seconds. Instead, these symbols must
be included in the custom format
string as string literals.