Check your VST Connections. Probably the outputs. And check your midi connections in Devices Setup, see if any are blocked. And if you experimented with your Preferences did you unknowingly turn on any Midi Filters?
I think the previous posters hit it with the CR and the VST connections. I don’t use the Control Room but I do know that when it is enabled, some stuff gets sent to a “listen bus” which is different then the “Main Mix” bus (or any other busses you set up in the VST Connections). Previews, auditions, etc. typically go to these alternate “listen” busses. Please note, I can’t speak 100% accurately about it so please check the manual, but I believe that it where your answer lies (as Elektrobolt and Conman have suggested).
HTH
J.L.
Ya, I’ve tinkered with just about everything by now… Only conclusion I can see is my Fatal1ty X-Fi sound card just isn’t cutting it for Cubase… That’s the only thing I can see causing the problem. I check all my connections, all my outputs are set correctly to the right speakers so forth but I just get nuthin’. 
Thanks for the help anyway folks, I appreciate it! Looks like I just need to spend yet MORE money.
Speaking of which, does anyone have any good recommends for sound cards? 
Try ASIO4ALL first to drive that fatality. Free universal driver. Usually the cards are all right as they go but it’s the drivers that really kill things. A better card should be budgeted for though but always do plenty of research about how friendly they are on a few forums and check reviews.
Has nothing to do with the soundcard.
You did not answer my MIDI question.
Sorry Elektrobolt, got sidetracked.
Ya, when I record, Cubase starts recording but nothing GETS recorded. I hit keys, no sound, nothing is recorded. Is that what you meant? Oh, quick tidbit: If I have the metronome click on I DO hear that. And also if I bring up the HALion virtual keyboard I get sound from that as well just not from MY keyboard.
Also I did download ASIO4ALL and that’s the only ASIO driver so far in the list that I can even get ANY sound out of, even in the VST selection window.
OK, here’s a new theory, tell me what you guys think: I’m not using my X-Fi directly for sound output, I’m using the speaker jack on the tower itself since I only have some Creative desktop speakers right now. Could this be the issue? Is Cubase trying to send the sound to my X-Fi output jacks instead of the standard tower jack? I have the speakers selected in the VST Connections “output” tab but there are quite a few other options in the drop down list, mostly all on my X-Fi (which has it’s own analog and digital outputs right on it).
That’s alright, no worries, but that I was asking about MIDI, not audio:
You “cannot record the MIDI events (not audio), even though the MIDI messages are indicated on the Transport?”
That’s right. Absolutely nothing gets recorded, nothing to playback. Just keep getting that little red bar jumping up and down while recording and a blank track is what’s recorded.
I’ve changed a few things. I hooked my speakers up to my actual soundcard’s speaker jack and have switched from ASIO4ALL to CreativeASIO (which I should have done a long time ago). But same problem.
Here’s another interesting tidbit: When I open the sequencer window, I can draw notes in just fine AND play them back and get sound that way. BUT, and this is weird, when I click on the virtual keyboard along the left side of the sequencer window, I get NO sound. AND when I press keys on my MIDI keyboard, the corresponding keys light up in the sequencer window… But no sound. 
I went ahead and made a quick 2 minute vid of what’s happening, give a view and see if I’m missing something. For some reason there is no sound at all in the video, I guess the capture software I use lies about recording audio. 
Check your MIDI Filter settings.
Checked the filter settings, not sure what I’m looking for but I played around with all the settings and still get nothing.
Make sure everything is unchecked (except for maybe sysex). I.e. only filter out MIDI SysEx messages.
Also, you do not need to enable “Monitor” (orange speaker icon) for the Instrument Track.
Have you disabled the “Control Room”?
Unchecked everything, disabled control room…
I just sent a support request to Steinberg. Hopefully they can help me out.
Just seems like something is wrong somewhere between my keyboard and the software.
Hi, for what it’s worth: I noticed in your screenshot that even though MIDI input source and MIDI output destination seem to be correctly set, there is no value in the MIDI channel box. That is weird. It should default to Any. Now as to why this could be the case, not sure.
Try this;
Open the VST instruments panel, select Halion and execute.
Create a midi track, leave the midi input to ALL MIDI INPUTS, set the output to Halion and the channel output to 1.
Activate the orange monitor button. Check your midi input meter for activity on pressing a key on your controller.
If this works, you can rule out your driver and sound card as the cause of this problem.
rvanraamsdonk pointed out the absence of a midi output channel on your screenshot. As you probably know Halion is multitimbral,; if you want to use more than one patch at a time triggered by independent midi tracks, this won’t work using the instrument track function as midi cannot be routed from a midi track to an instrument track. Please correct me if I am wrong.
L
Well I tried that first bit, I still get a MIDI signal… So I don’t think it’s my soundcard…
Well tomorrow Steinberg’s customer support is going to call me. Hopefully we can get it figured out.
Just got off the phone. They’re not sure what the problem is either.
For some reason Cubase doesn’t like the MIDI signal it’s getting so they recommended getting a new MIDI interface and keyboard.
So after I spend a few hundred more bucks then MAYBE I’ll get this working… 
i understand and sympathize with your frustration.
can you borrow or rent an alternate midi controller ( usb keyboard) for a weekend and test it before you commit to any bigger expenses?
have you tried your midi keyboard on a standard midi track rather than an intrument track? or a different vst instrument other than halion sonic? curious if the results are the same.
also you weren’t getting any sound from the internal keyboard in the key editor window so i am wondering if you have an installation issue.
I thought about that as well and after I upgraded to Windows 7 I did a re-install of Cubase.
And sadly none of my friends are audiophiles like me so no go on the borrowing front. That’s OK really. I was planning on getting all these things anyway, it just sucks that I probably won’t have all this until after my free trials of HALion are expired.
So after I get a new interface and possibly keyboard, I’ll have to fork over another $500. Which I was of course planning on, but it would have been nice to play with these trial versions.
Man, we have an expensive hobby, don’t we?