It sounds like you're fighting against the system a little bit - if you use the plugin's material editor instead of MXED, you will probably eliminate most of these difficulties. From the plugin's point of view, MXM files serve very little purpose, other than when you create a material by importing an MXM.
Regarding the materials catalog, it's not meant to be important where they're stored - they're not MXM files, so they have no value anywhere but in the Rhino/SW plugins. If you want to know, the place they're stored is under your user profile's app data folder; the actual location is determined at runtime to make sure the plugin uses a location where it has permission to write files, and where it can determine the location consistently on each machine. Besides for this, copies of materials are saved in the document itself, to be used in cases where they are not found in the database when that document is opened on another machine.
As to the Referenced vs. Embedded issue, this feature is designed to be useful in situations where you might be using plugins other than SW and Rhino and you want to use common MXM files to share data them. Each time the material is loaded from disk (i.e. the first time you access it during a session), a Referenced material will re-read the source MXM, therefore reflecting changes made to it. The feature is not meant to be used during the session, but I'll see what it would take to make Referenced materials listen for changes to their source MXMs and auto-update.
I am simplifying things for the next version, since I've gotten a good bit of feedback indicating confusion. I have come up with something which does what it needs to do, but which does not have a materials database - it will basically be as if you removed the materials page from the database manager and replaced it with the MXM Browser.
Regarding missing materials in a part document, I am not aware of any specific way to make this happen. Is there anything in particular about the part? I mean, is it a native SW part, or is it imported from another app? Not that I'm sure it will give me a solid idea of the problem, but the more you could tell me about the situation, the better.
Next Limit Team