Hi John !
Well me I prefer to use Cubase as a midi sequencer, I used to do that since many years and it works fine for me. I'm mainly using the audio in cubase to record the main mix and then add some eq and others treatments beofre burning my tracks to cds. If you do not have much external hardware sound modules, synths, samplers, mixers...well it's better to go for softs synths, it'll be a cheaper solution, but be sure you got a cpu that can handle it, a good HD and some RAM. But I'd recommend to buy an external midi keyboard, if you're a keyboard player, it's better than the mouse ! hehe
Me, I'm gonna change soon my computer for a faster one and I'll surely have a better look to softsynths like reason and reaktor.
But I like my hardwares stuff, it's a real interface you know !
For the midi dump problem, be sure you disabled the "Thru" option, it must be in the midi setup.
bye.
