I cannot remember the context. So the following is for any new users reading this thread.
IMHO prior to v2018, On my computer, TC did not do a good job of translating materials from RedSDK to Lightworks and vice versa. It's obviously true, one can set up duplicates, but I suspect most users won't want that hassle. Also if one created, say a wood floor in lightworks quality, changed the grain, plank width, gap etc. and expected it to render similar in RedSDK advanced. it is just is not going to happen.
Also, again IMO some things still do not translate properly like. Luminance and environments. With so many settings that can be changed in Materials, Luminance, environments, there can never be a seamless transition between engines. So for any 'Non Skilled' users, I would not advise switching engines in the same drawing.
With regards AnimationLab. some commands have to be set up differently for lightworks and RedSDK. Indeed prior to 2017, some commands did not work at all in RedSDK. So. Setting up quality lightworks animation, and switching to RedSDK advanced. In some situations it will break the animation. (not a good idea).
The above is simply for clarification, for any new users. Obviously not relevant to this exact discussion.
Darryl. With regards the .Red files. Back in v21, IMSI did an 'experiment' of creating all materials with a .Red extension, These individual files, contained all the relevant information for displaying a material. If you look in Program files (etc.) TC 21 materials, you will see lots of .Red files. It is also the reason that the TC installation file for v21 was 300 MB larger than v20 or v2015. I (probably wrongly) call it an 'experiment', as since then they left all the material setup to the Propin.dat file, the same as lightworks. At least that is how things appear to me.