1. Make sure that you have the correct M-Audio driver selected in Cubase and if you still are having audio dropouts during recording or playback, open your M-Audio software and raise the audio buffer setting. This should effect whether or not you hear pops/skips.

2. When you select a MIDI track, are you able to select the MIDI input that is connected to your keyboard in the Input routing option in the Inspector column in the project window?