I think you're right. Motu's drivers should report latency to Cubase - so that Cubase can compensate. Since I'm using 1024 sample buffers, the actual latency generated by the soundcard is more than 1.5ms. I think at 96K it would be about 10.5ms. Since I'm only experiencing 1.5ms, most of the latency is being compensated for by cubase. The only thing I can think is that maybe only driver latency, and not hardware latency is being reported. Seems like the drivers should be able to report to DAW software the total latency though.
I feel like there must be some way of configuring Cubase to deal with this though. It would be nice if I could just connect outputs to inputs and get cubase to ping and correct latency - just like it does for external fx plugins.