Tuesday night's home encounter was packed with entertainment but ultimately no points for Nigel Adkins's Blades.
A disastrous first half saw the Blades trail 2-0 but after Billy Sharp and Martyn Woolford had levelled, Marvin Sordell netted a deflected winner, which was confirmed after Sharp had a late penalty saved.
Baxter returned to the starting line-up after serving his three match ban, Reed dropped to the bench and Flynn missed out with a groin problem. In a late change, the fourth official and referee swapped positions with Ricky Wootton the man in the middle - the reason being the original referee was caught in pre-match traffic.
The returning Baxter was prominent early on. His 30-yard first-time shot was wide and it was his cut-out pass that paved the way to Colchester opening the scoring with their first attack, although a blind pass from Sordell was instrumental in putting MONCUR in the clear to clip past Howard in front of the Kop.
In response, Sharp headed Baxter's deep cross at goalkeeper Jones and a quick free-kick saw Basham almost get on the end of a Woolford delivery before a Colchester break forced Howard to save from Massey on 16 minutes.
Worse was to follow as set-pieces and possession was given away too cheaply and the visitors took full advantage. Another well-weighted pass, this time from Garvan, saw MONCUR beat the offside trap and he again slotted home.
The disastrous start continued and Colchester went close to adding to the advantage on a couple of occasions. A curler from Moncur was just wide, a 30-yard Garvan free-kick was tipped around a post by Howard and Massey shot across goal following another break.
As half-time approached Edwards was given space to let fly with a 25-yard effort, which clipped the top of the crossbar, whilst twice before the break Sharp had chances to reduce the deficit. Firstly, he got on the end of Edgar's through ball but Parish saved and then the striker fired over from Woolford's cross. Sammon poked the ball home but was adjudged offside and it did little to lighten the mood for Unitedites at the half-time whistle.
The start of the second half was eventful, beginning with United winning a penalty for Massey's foul McEveley, following a burst into the box. SHARP's effort was saved by Jones, but the goalkeeper was adjudged to have moved off his line before the kick, prompting the officials to ask the spot-kick to be retaken - the striker converted the second attempt.
It gave the Blades impetus. McNulty, on as a substitute, cut in from the left, twisted and turned a couple of defenders but shot wide of the near post, whilst Sharp produced a great touch from Basham's delivery but shot wide under pressure.
The Blades levelled, though, just after the hour. McEveley's throw saw Sharp lose his marker and cut back for the onrushing WOOLFORD to slide the ball under Jones.
United were on the offensive but Colchester remained a threat on the break. Another Garvan free-kick was tipped around a post by Howard and Massey and Garvan went close in one move which saw Edgar head clear with the Blades goalkeeper off his line.
Colchester wrestled back a little initiative as the final ten minutes approached - and a third goal was close, although there was a fair bit of luck involved for the visitors. A couple of ricochets in the build-up saw the ball drop to SORDELL, who also had the aid of a deflection off Edgar to beat Howard.
The drama was not over, though. Howard's long punt on 86 minutes saw McNulty flick on and with Sharp, clear on goal, he was bundled over by Elokobi. A penalty for the Blades and a red card for Colchester skipper was the result but the spot-kick saw Sharp's blast kept out by Jones.
Colchester's slowing tactics saw six minutes added to the 90, but despite the Blades being on the offensive there was not another notable chance to level the scores once more.
Blades: Howard, Freeman, Basham, Sharp, Baxter, Collins, Woolford (Scougall 83), Sammon (McNulty 54), McEveley, Campbell-Ryce (Higdon 89), Edgar.
Unused: Alcock, Reed, Long, K Wallace.
Colchester: Jones, Garvan, Briggs, Edwards, Elokobi, Moncur (Kent 87), Massey, Eastman, Vincent-Young, Harriott (Ambrose 74), Sordell (Bonne 90).
Unused: Wynter, Szmodics, Sembie-Ferris, Parish.