Importing a cast member makes a copy of the file being imported and brings the entire set of data for that castmember into your movie. Your movie becomes correspondingly larger, and any changes made to the original file have no effect on the castmember in your movie.Linking a cast member does not make a copy of the file being linked. All that is brought into your movie is a reference to the file's location on your file system. Your movie does not become significantly larger, and any changes made to the original file are reflected in the castmember in your movie.
Each method has its advantages and disadvantages. Many Director movies benefit from a hybrid approach - some of the cast may be imported, some may be linked. It is not only possible, but probably a very good idea to make the decision on a cast-by-cast basis.
Linked cast members have the advantage of automatic updating. It is conceivable that, with a well-organized computer network, a team of graphic artists could each tweak a folder of castmember graphics while the Lingo programmers worked on the code. Each team member could then focus on his/her assigned tasks independently and all work would be reflected, via links, in the movie. In practice, this lofty goal is difficult to achieve in a hectic production environment. And at some point prior to shipping the movie, it would be necessary to collect all the linked graphics into the local folder and update all the links.
Imported castmembers, because they are completely contained by the host movie, require no organizational mechanism other than the Cast Window itself (and the Cast Window is an excellent organizational mechanism). The Cast Window allows for fairly convenient updating if you do it one cast member at a time. You simply select the desired castmember in the Cast Window, select Clear Cast Members in the Edit Menu, and then select Import... from the File Menu. The newly imported file will replace the prior castmember, not only in the Cast Window, but also everywhere it appears in the Score Window. This is a quick and easy update for a single castmember, but it gets tiresome quickly for more than just a few updates at a whack.
Sound files are always a good candidate for linking, especially when they are quite large. Linked AIFF files spool from the hard disk when played, and therefore it is not necessary to import them, freeing up precious RAM for sprite graphics. Another good reason to link graphics files is for run-time variations. It is conceivable to design a multi-lingual movie which can accept a suite of linked castmember files, each of which is designed for a different language.