I have two different MIDI devices, the keyboard is hooked into the Digidesign Mbox2 and my yamaha drum set hooked into the steinberg M14. I'm running Cubase SL 3 and a series of VST instruments. So, here's the deal, when playing on either MIDI device the sound is delayed for three seconds, yet when something is already recorded it plays with in sync with the play line. Why is there a delay? How can I get rid of it?

Sounds like the dredded latency issue.

Try going into your cubase settings and try a couple different drivers, one will have less delay (latency). You might also want to reduce the buffer size on the one which works best. Try this first.
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Recording Studio Suntans