are you sure that the synth you’ve got (HSE2) actually uses Soft pedal, ie: does it have soft pedal samples or incorporate some sort of EQ for Soft pedal? Doesn’t do much for me - Sostenuto it does but Soft I dont think so. That could be the prob.
Anyway, dont know that specific keyboard, but as the man says, you may try turning LOCAL OFF, in case it’s sending the controller messages to the onboard synth somehow instead of Cubase.
Likely though, Larioso’s suggestion of checking the MIDI monitor should help - open up a midi track on cubase, set the input to the keyboard as normal (see if its communicating notes etc) and then in a slot on the MIDI INSERTS rack in the inspector - load up MIDI MONITOR - you should be able to see then if the pedal is registering in Cubase and what midi controller message its actually sending out.
Here’s a pic! you can see the MIDI page for HSE2 and the CTRL subpage - just check none of the filter switches are lit up, i.e. HSE2 is not filtering out the pedal messages
and you can see the pedal number register in the midi monitor, when I pressed the Sustain pedal it registers 64, so presumably yours should register 67 for Soft. If that’s all working fine then, its probably just the limitations of HSE2. It doesn’t have the legs.
Now, if you were using something like Ivory, you’d have soft pedal samples built in, so it plays them back when you press the Soft Pedal. Mmmm, Ivory ;o)