Dynamical grating diffraction experiments and reflection/transmission polarization spectroscopy have been conducted on azo-dye doped Blue-Phase Liquid Crystal (BPLC) to investigate the mechanisms responsible for laser induced refractive index changes. The underlying mechanisms for the transient grating diffraction components are attributed to thermal indexing and lattice distortion, whereas the persistent component is due to lattice distortion/expansion caused by laser excited dye molecule isomerization. These mechanisms were distinguishable by their response dynamics and gave rise to the observed reflection spectra and photonic bandgap shift, polarization dependency and optical activity. Some preliminary studies have demonstrated the feasibility of using these mechanisms for coherent holographic and direct image writing operations.