Jim,
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>2) REINDEX (except in VFP7SP1) will remove CDX "bloat" of both the deleted TAG variety and the 'random inserts causing extra nodes' variety. A smaller file is always better and I should think especially so where it is a .CDX. A REINDEX will also result in a 'contiguous' (as much as available RAM will allow) .CDX file as its output.
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You're confusing index size with index bloat. REINDEX command in any version of VFP will remove index bloat.