We have two offices and one server in our main office. The smaller office connects to the server via internet. When trying to access drawings and other information from the server from the smaller office it takes a lot of time to do so.Anyone have any ideas that we could use to increase our productivity in the smaller office?I suggested maybe a server for the smaller office that would connect to the main server at night and update each other so that they both have current data.

You can consider file replication between servers or a more elaborate setup with Vault server replication.

How exactly does a Vault server work? What kind of hardware and software do you need and will it affect full path xrefs?

Autodesk Vault server is a simple to use document management solution (EDM/PDM). It runs on a Windows server or workstation. See www.autodesk.com/vault
 
Xrefs can handled directly from Vault (Vault client for AutoCAD). I would recommend to consult your Autodesk dealer.