That is awesome, thanks will try and report back…
Alright- officially a lot of progress and officially I am going crazy.
First the good stuff:
Disabled Asus sound card as well as on-board sound and now running through USB with CI2+ and the latest and updated Yamaha driver. I don’t hear any latency, to my ear seems to be in real time and I believe Latency that I have is now acceptable: it’s not below 12 , but rather input is 16, output 20. I’ve run “Latencymon” and after installing new bios and turning off CPU throttling (speedstep) "Latencymon"declares system as able to run Cubase with no problems. Also I’ve Over-Clocked CPU to 3.7GHz.
No more crackling, chocking and distortion , neither in playback nor in live MIDI play. All good.
The bad: The bad is SUPER BAD-
Now when thinking of bad, I think that this is going from day one, the first day of Cubase 6.5 installation. I just haven’t paid any attention to it, being overwhelmed with audio set up.
I am completely unable to hear any audio or wave files in previewer as well as in project itself . I can hear the beats and banks content but no loops mash content of any kind. This does not apply to any audio files and mash loops previously recorded in C5. But any new audio file I add as a track produces no sound. And again as I said I can NOT hear them as a simple preview either. Beats yes, Audio files NO.
???
I’ve just purchased and downloaded the new set of audio files from Cubase and I see them and I can choose them but no sound whatsoever (even) in preview coming from those either.
What is wrong this time?
HI
Wonderfull 
for things are going to work.
You checked you routing under F4? Output ?
Perhaps a screen or two from your settings under f4 and your project.
Greetz Bassbase
There we go, now I have it all… 
Enabled control room, set studio outputs to speakers via Yamaha driver, and it all worked.
Awesome, I am in business. thank you all guys - let’s stay in touch.
Best
LFD
You are welcome looking forward to HEAR from you…
Greetz Bassbase