That is odd. Have you trashed your application data?
First, please shut down Cubase. Then go to the Start menu, All Programs, Cubase 7, Cubase 7 User Data Folder. In the top address bar, you should see “App Data (roaming) Steinberg” Click on Steinberg at the top. This will put you in the Steinberg app data folder. Trash any Cubase or Nuendo folder that you see here. This will trash your key commands, preferences, sound card settings, etc. It also should clear up the problem you are having. Restart Cubase. You will need to reset your audio outputs (Devices, Device Setup, VST Audio System).
If you start a new empty project, and add one MIDI track, then draw a MIDI event and a MIDI notes, does that fail?