Hey Mickeyboy,
I think I got it. I did a few stuff though so I don't exactly which is the magic button I pressed! Since our equipment are quite similar, except that I'm using Cubase Studio 4, it might work for you too...
Try this (I hope your SX3 screen is similar to mine)...
1. Go to the "File" menu and select "Prerefences".
2. From it, click on "VST" - under the option "Delay compensation....(for Recording", select 0.3ms.
3. click "Apply", "OK" then get out of that menu.
4. Now go to "Device" menu and select "Device Setup"
5. Click on "Midi Port Setup" - At the bottom of the screen, you will see "Use system time stamp...."
6. Make sure the box is "ticked"
After that, my recording sounds much better although it is not watertight yet!
You might wanna read this as well:
http://knowledgebase.steinberg.net/95_1.html
If I fig out more stuff, will share with all! Good Luck!