Thank you for the reply Fredo. I looked at the block diagram for the UR28M. I'm not QUITE sure if the diagram applies to direct monitoring or not (page 38), but it does show a signal being affected by an initial "Mute, Level and Pan" and then split directly to the outputs. The same signal passes on to "Mute, Master, Balance" before exiting as a Mix 1, 2, or 3.
So though I'm not entirely sure, it seems that engaging Direct Monitoring while using the UR28M does allow Cubase to control the output - but only partly - via the channel fader/pan/mute, and also the Master fader/pan ... perhaps similar to your Nuendo setting.
Though - different to what you are saying in your post, as far as I can see this is "hardwired" into the interface, with no on/off control as you describe (you're saying Nuendo has that on/off control, or it's in the hardware?).
(PS - all this comes from a Rev-X routing question I am trying to figure out (to get the Rev-X panned off center) ... if you would be interested, and know about that, please drop in here! viewtopic.php?f=157&t=61854