I have been dealing with this for a while, this topic helped me - so, I have a few hardware units that I just could not render in place as RACK instruments - and i have been rendering in place since the option was introduced. Being composer with large projects, this was a great feature - but for external synths I found myself in a pickle. Instead of rendering in real time, i would just get - no response from software.
Then i read Chikitin’s post and found myself ashamed - I am using Cubase since 1996 and I have let something like this go past me.
True, I have seen people rendering in place from RACK, but i think it was older version of Cubase, for me it didn’t work.
Once I used it as a TRACK vst instrument (ofc provided you connected external instruments connections and set up MIDI), render in place worked.
One note though, once I render in place, I cannot create new vst instrument with the same synth - i have to deactivate previous track. I guess it makes sense because of the inputs.
I strongly suggest using both methods, so MIDI+audio tracks AND vst instrument, because you might want different things and different flows. However, again, TRACK vst will be bounced instantly, RACK will not. TY @chikitin