All you need to do to be totally up and running is to get hold of a slightly better soundcard. Now... I can almost hear your gasp of disappointment from here at the thought of having to cough up a fortune for a pro audio sound card, but there's some good news...
You do not NEED to buy a mega expensive pro audio sound card. Yes- it would help. Yes- it may be something for the future. Yes- it would have more features. But right now you'll get by on a Soundblaster 5.1 Value card. You'll get one for around $20 and it'll get you up and running with midi and multiple audio tracks too.
This is a contraversial subject and I've often got a lot of stick in here for always giving the thumbs up to cheapo sound cards, but believe me... you *can* get away with them if you're desperate. If you've got the money for a pro audio card then all the better!!!
As for software.. well, it's all a matter of personal choice but for what it's worth I would recommend Cubase cos I'm a bit of a sheep and I like the idea of sticking with the rest of the herd (more books, more virtual instruments, more effects plug-ins, more websites, more users to get advice from... etc).
I've never used Cubase SX and I don't know much about it, but I'm using the slightly older Cubase version 5 and so far I have nothing but good things to say about it.
I've also read that Cubase and Cakewalk have quite similar layouts, so the changeover shouldn't be too painful should you go in that direction.
Listen... don't be put off with the idea of having to suddenly go through the slow and painful nightmare of *learning* how to make music using audio tracks.
I wasted 4 years of my life trapped in the world of MIDI, thinking that MIDI was all I'd ever need and that the audio world was just some worthless venture for geeks who liked looking at oscillators in their spare time.
But let me tell you... if you put your mind to it you can learn pretty much everything you *need* to know about audio recording in a day or two.
I've only been tuning into audio for 2 years, but already some very good things have been happening for me. It really has opened a whole new exciting world and I urge you to liberate yourself from midi and give it a go!
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Get a new soundcard. Tune into the audio vibe.
Good luck!
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David