It's a little tricky isn't it? I had the problem too, I'd imagine everyone does, but it's no big deal really. You'll be able to use the mixer in Cubase for submixing your tracks, no problem. What you will need to do is set levels with your soundcard. Any incoming signal will bypass Cubase's mixer and come out the other side with the recorded signal. Does that make sense? Here's how to do this...
Go into the "system" menu from the Audio menu. You see where it says "monitoring"? Select "global disable" and you shouldn't have anymore problems.
For further information, check your manual page 49.
What you will need to do is make sure you're system mixer is configured to be able to hear the signal...it probably already is, but just go there and check, or hop in and try recording.
By the way, I might as well run through this as well. When setting levels initially, here is what I do.
1) Set the level at my mixer. Or as may be the case for someone else, set your level on your mic preamp.
2) Set incoming signal's level on my soundcard's input. I, unfortunatly, don't have a level meter in my soundcard mixer software. I jump back and forth between the soundcard mixer and Cubase (where I've selected the "in" button on top of the level meter on the mixer; see it?) until I'm sure my level is satisfactory.
3) Record my part.
4) Deselect the "in" button so I can see my "tape" signal.
At this point (assuming my take was a good one) I'm ready to use Cubase's mixer for EQ, Effects, whatever my heart desires.
I hope this helps you out. I know how demanding this stuff can be, but as weird as it may sound to you now, it's not that big of a deal. I use a soundblaster card, but if I had a real recording card, I wouldn't have to jump back and forth between Cubase and the card's software as they put level meters in the card's software.
Before you sour on Cubase, understand that this isn't a Cubase bug, you would still have to monitor the input levels on your card regardless of what recording software you use.
Hope I helped you out. Anymore questions, I'll do my best to help.