I think your problem is relating to a question I just posted regarding the CR (Control Room) output. I’m not clear on why Cubase is this way, but you can actually set up the SAME two pairs of outputs going to both your ‘Outputs’ (in the Audio Connections window from the Studio tab in your Project) and your CR. What this does is parallel the same outputs - which increases the output level going to the monitors and causing distortion… Understand?
Open the Control Room tab in the Audio Connections window and you will see that it has an ‘Enable/Disable’ button. If it’s BLUE, then it is enabled. Click on it and it will turn gray and become disabled. I think this will resolve the distortion issue you are having.
Of course, you can remove the Output connections here, too, and this will do the same thing. HOWEVER, if you do this you will not be able to audition items that you bring into your Project - AND - should you perform an Audio Mixdown in Real-Time, you will not be able to hear it. Both of these functions are supported by the CR output. Which is to say, as far as I know, if you want these two features then you will have to set up your parallel Outputs and remember to ENABLE the CR before you do either process (audition music outside of your Project that you might import, or perform a Real-Time export of your mix), but then don’t forget to DISABLE the CR afterwards.