D'oh! I was fully qualifying other references to classes in Rhino.Mocks namespace - which ofcourse doesn't work well with the extension methods :-)
I was missing "using" statement.
using Rhino.Mocks // ... was missing
var foo = Rhino.Mocks.MockRepository.GenerateStub<IFoo>();
// following Stub method does not exist.
foo.Stub(x => x.bar())...
I hope this helps someone else.