Cubase LE 7 no sound.

I have a Steinberg CI1 plugged into my computer and a guitar plugged into it with passive pick ups. I can hear myself playing through the headphones which are plugged into the pc back panel. Cubase shows sound spikes, but after recording the recording is mute.
Mute is unchecked, VST connections show all of my inputs and outputs of the CI1 connected, the CI1 is checked as the default recording device, i have no idea what im doing wrong.
i’d aprecciate if anyone were to help me out here.

A few things:

  1. Shouldn’t the headphones be plugged into the back of the C1?
  2. Do you get audio out of the C1 in other applications (with Cubase closed), such as a media player?
  3. Have you selected the C1 as Cubase’s audio device (Devices > Device setup)?
  4. When you say “the recording is mute”, do you mean nothing is recorded, or that Cubase doesn’t appear to be playing it, or that Cubase appears to play it, but you’re not hearing anything?

Usually I find it best to get playback working OK and then worry about input, just fewer things to go wrong in each step by doing that.