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Our development system is way out of sync, both configuration- and data-wise. We would like to refresh our development system from the production system. How can this be accomplished? What things we need to be aware of? I know we can restore the production system (PRD) from from tape to the development system (DEV,) but that will wipe out everything including transports, notes history, etc

The system copy guides can be found at http://service.sap.com/instguides*. Different backup/restore procedures exist for the different databases supported by SAP.

If you restore PRD over DEV, it will wipe out everything. You should therefore find a point in time in which development projects finish and are brought into production. You should only re-create DEV from a backup of PRD if both systems are more or less in sync or if your development teams agree that certain developments are lost.
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Looking for a way to complete SAP authorization updates without logging off?
Set the profile parameter (RZ11) auth/new_buffering to "4," so that authorization changes
take place immediately.
If you have questions in this area you can refer to note 209899.

Use profile SAP_UONL while client copy.