Dropping your buffer numbers will decrease lag, but usually creates a higher load on the CPU. If you can drop the buffer and not get noise and odd behavior then that is a good direction. If you start getting odd sounds or behavior, increase the buffer size.
If you're not already aware, if you are duplicating the VSTi, I would suggest if it possible, routing MIDI channels from different tracks to a single instance (where possible) of the VSTi. VSTi is on track 1. Track 2 MIDI will say is channel 1 MIDI out. Set the instrument on the VSTi you want track 2 to play to the same MIDI channel. Then just record each track and set the out channels to each instrument. That will reduce your load and actually a better way of doing your composing. Then you can name each channel the part is is playing and give you much more creative control than having everything in one MIDI track.
If you are doing this, then ignore, but this is the best way to score with strings and get a more authentic sound. But as a rule, I keep the VSTi track with no MIDI information.
On the polyphony, that is just how many sounds it will process. If you are increasing it and getting better sound, could be becuase you are requesting it to play more sounds (400->1200), but that means higher VSTi load (the way MIDI works is it will load certain parts of the instrument for attack and tail, then synthesize the middle) and more sound files to process.
MIDI can be hard to get it to sound more real, but I think if you have a good VSTi (and it looks like you do), then it is a matter of understanding how to best manipulate the computer to get it to do what you want. MIDI or not, this part of recording really is pure digital as is all VST's and VSTi's).