We address two classic problems in the design of groupware systems. The first problem is that of spatial orientation and coordination of attention. Unless members of a distributed work group can follow shifts in each other's attentional focus, they are unable to understand who is talking about what with whom. A mixed-reality system, cAR/PE!, which was specifically designed to support distributed team work in an industrial (automotive) setting, is introduced. The second problem we address is related to the inevitable heterogeneity of most communication networks. In general, only some links will be mediated by high-speed broadband connections. This means that at least some participants have to be represented in conversational space by their anthropomorphic models, or avatars. What are the emotional consequences of replacing a human being with a virtual character? Will a normal affective attitude towards the person still be possible? New cognitive studies are presented to demonstrate that the solution to both problems is feasible and can result in improved mutual awareness, productivity, and emotional involvement of persons involved in computer-mediated interaction and work.