So what exactly is the difference between the two Navisworks file formats?
NWD File Format
When you save to a Navisworks (NWD) file, all loaded models, the scene's environment, the current view, and favorite viewpoints (including redlines and comments) are all saved to a single file. This is known as publishing a Navisworks file and creates a "snapshot" of the project. An NWD file is considered a complete file and can be opened in any Navisworks product and the Navisworks Freedom viewer.
NWF File Format
When you save to the Navisworks file format (NWF), only a list with pointers to the files currently loaded is saved, along with the scene's environment, the current view, clash results, if available, and favorite viewpoints (including redlines and comments).
To open an NWF file, a Navisworks product is required, such as Review, Simulate, or Manage (not Freedom), as well as access to the original CAD files. (Note: Copies of the original CAD files may be used. However, they must have the same file names as the original files).
When you open a CAD file in Navisworks, by default, a corresponding cache file (NWC) is created, which contains all of the conversion details required by Navisworks. When you subsequently open that CAD file in Navisworks, it will check to see whether a cache file is available. If it is, then Navisworks will check to see whether the CAD file has been modified since it was last opened in Navisworks. If the file has not been modified, Navisworks will read the cache file, speeding up the loading process and utilizing less memory. If the CAD file has been modified, Navisworks will read the CAD file in again and re-create the cache.
It is strongly recommended that you use an NWF file when referencing several CAD files. This will prevent you from having to republish the Navisworks file whenever one of the CAD files is amended because the NWF file will open the most recent files available. The NWF file will read in the cache files of CAD files that have not been modified, which can significantly reduce the time to load the files and the amount of memory used.
For this reason, it is also strongly recommended that you use an NWF file when conducting clash tests. The original clash results will be saved in the NWF file. You can then modify the CAD files as necessary. When the NWF file is opened again, the revised CAD files will be opened, and the Clash Detective, having retained the original clash data, will determine that those clashes have already been resolved.