Shouldn't the use of a subclass be ok on the override method?
No. Aside from anything else, which implementation would you expect to be called if the caller provided an instance other than your subclass?
testBase t = new test();
t.LoadCRUD(new SomeOtherDMO()); // What would be called here?
You might well argue that it would make sense to be able to override the base method with a subclass method which is more general (e.g. with a parameter which is a superclass of the original parameter type, or with a return type which is a subclass of the original return type) but .NET doesn't allow either of these anyway. The parameter and return types of the overriding method have to match the original method exactly, at least after generic type parameter substitution.
It sounds like you may want to make your base type generic:
public abstract class TestBase<T> where T : TestDmoBase
{
public abstract void LoadCrud(T dmo);
}
public class Test : TestBase<TestDmo>
{
public override void LoadCrud(TestDmo dmo)
{
...
}
}
Note that you should follow .NET naming conventions, too - even in sample code.