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Sonar x1 Producer x64 [M-Audio] [Weird Latency/ Choppy Scratchy Sound] [Help Please]

Hello, I've recently purchased a copy of Cakewalk's Sonar x1 Producer Edition to try to enhance my skills and move up. Cubase 5 just seemed like it was holding my hand the whole way so instead of upgrading to Cubase 6 I went with this. Anyway My Audio Interface is a M-Audio Fast Track Ultra my operating system is Windows 7 64 Bit Home Premium and I'm having some weird latency issues.

Where do latency problems manifest?

I understand what latency is, and I know it perfectly well when I have the monitor button in Cubase on, but what I am confused about is why very low latency should be an issue, like when software is marketed as having very low latency. It seems that Cubase applies whatever inherent latency there is across all tracks, and I have never had any problem tracking.

Latency

Latency is a measure of time delay experienced in a system. It refers to a short period of delay (usually measured in milliseconds) between when an audio signal enters and when it emerges from a system.

Does S/PDIF out have any latency before DAC?

Does S/PDIF out disregard the sample buffer settings of an interface, and only have sample rate latency?
(e.g. 48kHz = 48sample buffer / 44.1kHz = 44.1 sample buffer)

In other words, say you have on-board sound with a S/PDIF out; If you send out a 44.1kHz audio stream to an external DAC, will the only latency be 1ms + External DAC latency?

DAW Latency values

I'm sure this has been discussed before. but I wanted to know if these latency numbers were good or bad.
I use an RME FF800 and this is what I see listed in Cubase in the Device Setup.
I have not tried lowering the sample buffer because it runs very well with these settings.
And I don't seem to notice this delay when I record.