Hi Gerry, just a quick note to clarify the last method I posted regarding the Kontakt multi-timbral use. This solution can be useful if the simple instrument track seems too limited, because it allows more control without much more complexity.

It is possible to use just ONE instance of a VST such as Kontakt, with multiple MIDI tracks and instruments, routed to just ONE audio track. In my last post I tried to outline, step-by-step, this easy version of a multi-timbral setup.

I agree that it seems some of the instructions out there can seem very confusing.  I suppose we could use a [MIDI track] + [audio track] per instrument, but I think we would all lose our minds keeping up with the routing options, etc.

BUT fortunately, it is not necessary to add an audio track to each MIDI track.

After starting a new Sonar project using the "16 Channel MIDI" template, just insert the soft synth after the MIDI tracks, using "First Synth Audio Output"; "Enable MIDI Output" options, and the routing is completed for you. The MIDI tracks and channel numbers will be setup automatically in ascending order, by default, and routing to the VST is complete. All you need to do is match up the instruments in your VST with the desired MIDI channel numbers. All the audio sound from Kontakt routes to the Sonar output "Master", by default.

Thinking through this question has been a benefit to me as well, as it has clarified a few more details in my understanding of this feature.

Thanks again. And good luck with all your future musical projects.      Regards.      Gerry

Just a quick note as an update to my previous comments in this thread. I had outlined a simple way to use multiple instruments on their own MIDI channels from Sonar, using one instance of Kontakt, with the resulting mix coming back into one audio track in Sonar.  This provides all the MIDI control you need, and is acceptable if you can get the mix working within Kontakt. 
 
For me this was a more CPU/RAM friendly way to run a multi-timbral Kontakt setup, then to run a stack of separate Kontakt simple instrument instances within Sonar. But it does limit the audio effects in Sonar to working with a Kontakt Master track only.
 
So I would like to add that I recently ran across an awesome thread where Robert E Bone explains in an easily understandable way how to assign multiple audio outs from Kontakt.  This is well worth looking into, as it gives you the power to use any Sonar audio effects on any instrument in the Kontakt multi, on it's respective audio output.
 
http://forum.cakewalk.com/Sonar-X3-and-Kontakt-5-per-Bob39s-request-m3030422.aspx
 
Well done Bob!