LDraw to LDD conversion
While some earlier (pre 2.0) versions of LDD came with LDraw import and export features the latest version does not ship with a valid conversion file and has also lost the ability to read MPDs. Fortunately this problem is easily remedied by installing a customised conversion file.
The conversion file
The conversion between LDraw and LDD is governed by a set of rules contained in the 'ldraw.xml' file in the found in the LDD2Directory/assets directory. Unfortunately the one that ships with current versions of LDD only contains a single mapping rule.
Fortunately Mike Gallagher has been kind enough to work on a conversion file which can be found here along with a readme file describing what works and what doesn't work.
Installing a custom conversion file
To install a file just go to the LDD2Directory/assets directory (where LDD2Directory is the directory that LDD2 is installed in), backup the ldraw.xml there and replace it by the new one. Once this is done start or restart LDD and it will now use the updated list.
Reading an LDraw file
Once you've installed the new conversion file you can read LDraw files (but not MPD files). To do this you just select "Open File" and find the ldraw file you want to read. After that it should open although there are likely to be numerous mistakes due to oversensitivity of the LDD collision detection.
Writing an LDraw file
With luck this system should work better than reading. Just select "Save as" and add ".ldr" to the end of the filename. The system should then save an LDraw file rather than the usual LXF file.