Howdy MG,
Well, this may seem a silly question, and perhaps you've answered it above (but I didn't see it directly), but have you checked out the Advanced Properties in your Control Panel/Sounds and Audio/Sounds and Audio Properties/Audio tab? See the picture below for what this looks like on my machine:
I know you said that it's a MIDI only problem, but perhaps these parameters affect MIDI playback differently than other audio - I honestly don't know, but I offer it as yet another "something to check" at this point.
I'm stumped by this one, MG. I haven't experienced the problems that you're describing, so I don't have any solutions that have worked for me to offer.
Have you tried checking out the Creative forums? You can go here
http://forums.creative.com/creativelabs?region=CLI to the home page, and there are a couple of headings that may be of interest to you.
Good luck with this - you've had an interesting experience so far with the sound card issue. By the end, you'll be the guru of the forum!
ttfn,
Sherry