Help! How to properly update Keyshot scene from Solidworks?

Hi All, I'd like to seek your advice on how to use Keyshot properly with Solidworks. I have just started using Keyshot 4 with Solidworks 2012, and I've also installed the plug-in that allows live-linking.

So I have an assembly model with half of the components hidden (basically it is a linear pattern the model). I clicked "Render" and the assembly appeared in Keyshot properly. Then I made the hidden components visible, and pressed the "update" button for Keyshot. But to my horror, the updated model in Keyshot has part locations completely messed up- parts are all over the place in different orientations.

I've attached the screenshot showing what it should look like in Solidworks, and the unexpected "exploded view" in Keyshot. What have I done wrongly?

Another question I'd like to ask: is it better to assign materials in Solidworks, or is it better to do that in Keyshot?

Thanks!