We've found the problem is with the midisport using windows MIDI.

First, go to My Computer>C:Drive>Program Files>Steinberg>Cubase> MIDI Port Enable and copy the file "ignoreportfilter" and paste it outside the folder on the same level as Audio, Components, cubasesx3.exe,TimeBandt.dll etc. (back one layer)

Then launch Cubase, go to Device Setup and use the Direct Music Midiports (they have a "[ " after the Midisport 2x2.Som
Set Show to Yes and Active to Yes.
Set Windows MIDI all to"No"

If you have other settings in MIDI Device Manager change them to the "new" midiports.
That's it!