Your drivers are failing. Have you installed the correct drivers for the USB device and have you pointed cubase to those drivers?

CME dont provide any drivers, but on their website they recommend using ASIO4ALL as the driver. I've installed that & Cubase can see it, so i assume i've pointed Cubase to the drivers?

Can you see levels in Cubase?
Can you get the signal to route through Cubase into monitors?

Is everything working except when you hit record it dies?

yeah everything is fine until I hit record. The levels work & theirs a signal, but when i hit record its as if the box dies & levels are all gone:S

Don't use a USB hub. If you're not using a USB hub, you should seriously think about taking it back. I could think of a number of equally priced interfaces with proper drivers and included software bundles.

Hmm.
I'm thinking and thinking and all I can come at is either what Hueseph already said, that the device is whack.
Or, your Mother Board is.
Make sure whatever USB port you are connecting the device to has no other connectors in the ports next to it. Some Mother boards have two hubs on the board with like 2 ports at the front and 2 ports at the back. You want to use the back ones and only one. Try using a PS2 Keyboard and have the mouse connected to the front hub. If the choke is the USB that is.
If your HDD is giving drop outs it shouldn't be losing the device like that.
Tricky problem you have.

Things you may want to check also;

USB drivers in Control panel>System>Hardware>Device Manager.

This review reads like this behavior is common place with this usb/firewire split personality device ;)
http://www.soundonsound.com/sos/feb08/articles/cmematrixk.htm

nah no usb hubs used. Im using a laptop so theirs no mouse/keyboard running through usb ports/hubs.

The main reason i want this to work is i got it at a runout price, so it was MUCH cheaper than everything else, which may not be such a good thing in hindsight

That review is what i've been trying to follow, but so far to no avail. Im thinking i'll just take it back or see if the guys at the shop have got some sorta idea:S

Your professor on your laptop is what? Core 2 Duo? Or AMD?

Pentium Centrino, not core 2

He said Professor, not Processor.
Answer the question properly!

What speed is the processor, any idea?
Something tells me a Centrino ain't gonna cut it.

Take it back. It was a lemon when it came out and it's still a lemon. There are so many better choices out there.

Centrino is fine, the comp has barely worked up a sweat running this setup, its only if when i run guitar rig that it starts to struggle, otherwise its a pretty basic & low power setup

& im gonna take it back & see if they cant figure it out:S
cheers all