After considerably reducing the number of polygons and exporting to OBJ via XfrogTune, I lose all material info when importing via Vue. Why does this happen? How do I correctly import an XfrogTune model?

VUE can't read the TIF format used by XFrog, the easiest way is to convert the XFrog mat files to JPG  for use in VUE.

hein is wrong, Vue can read the tiff format. If this was a texture problem, Vue would ask you to point to the right texture.
The problem with the obj format is that it needs an .mtl file to export with textures. This mtl file contains all the paths to the textures. Now XFrog 3.5 writes this mtl file, and obj export fro Xfrog 3.5 import in Vue fully textured.
My guess is that XFrog tune doesn't write this mtl file.
If you're a member of the XFrog yahoo list, ask there too.
If you have XFrog 3.5, why don't you just reduce the poly count directly from the bottom of the interface?

I have Xfrog 3.5. I did not know I can reduce poly count right within this app! How can I do this?

At the bottom of the interface, you have the poly count of your object. Just change the value to a lower number.
You can also do this in Vue, in the edit object menu.

Thanks bruno for the advice

Also use Lightwave for exporting from XFROG and inporting into Vue.  This format seems to work better and will use the TIF alpha layers.

Yes, great advice, Dave, lwo export  is the best.