When I use the Pianoteq player I can play without any latency. When I use the same settings in Sonar Plat, there is enough latency that recording is near impossible. I'd estimate about 200 ms. The problem is the same with all my VSTs, so it's likely something with Sonar, it's configuration, or my expectations. Even if I just select the piano VST and play (i.e. no recording) the latency is present and unchanged.
 
Q: should I be able to play/record a VST without latency if the VST plays without latency outside Sonar?
 
I've tried to turn all the FX off (via FX button), and it makes no difference.
 
Any thoughts, comments, or suggestions would be very welcome.
 
Thanks - Allan
 
4 Core AMD @ 2.9 GHz, 16 GB RAM. CPU utilization is low (<15%)

Aside from latency from plug-in delay compensation the other source is audio interface configuration. Make sure the Preferences > Audio > Playback and Recording Driver Mode is set to the best performing driver for your interface. This is usually ASIO. The actual latency adjustment is made in Preferences > Audio > Driver Settings. If using ASIO click the ASIO Panel button and adjust the the client for the interface to 128 sample buffer or less, otherwise use the buffer size slider above the ASIO Panel button.

As above.
In addition update your audio interface firmware and drivers, and if you want to improve your performance download a copy of latencymon.

have u tried to set ThreadSchedulingModel to : 2

Improved Multi-Core load balancing 

SONAR has supported scalable load balancing for multi-core computers since SONAR 3. In 8.3 we spent some time researching different techniques to improve our task scheduler (the internal component that distributes the project workload across multiple threads). The new scheduler mechanism allows for a more even load across all cores on a multi-core system. Not only that but the new mechanism consumes less CPU and is more power efficient. We haven't measured this yet but it should actually consume less battery resources on a notebook than SONAR 8.0.2! SONAR goes environment friendly :-) 

Since all systems are not made equal we decided to make this new scheduling mode configurable  
From the help file, the new aud.ini option to control this is: 

ThreadSchedulingModel=<0 - 2> 
Type Integer 
Default 1 

This variable goes in the [Wave] section and controls the interaction of the main audio thread and worker threads on multiprocessor systems when the Use Multiprocessing Engine option is enabled. Depending on the system, a particular model may result in less glitching and better overall performance. The values are as follows: 
0 = Same as previous versions of SONAR. 
1 = (default) Better thread balance. Model is more efficient and can provide cycles for other tasks. 
2 = Additional worker thread is created. This may result in improvement with Quad processor systems or higher. Not recommended for Dual processor systems.

and/or Live Input PDC override  

www.cakewalk.com/Documentation?product=SONAR%20X2&language=4&help=Recording.23.html

? 

Thank you for all the suggestion. I got to the bottom of the issue after reading the various responses. There were two issues:
1) My ASIO driver was originally set to buffer 10 ms, but somehow that had gotten increased to 60ms by something. I think it might have been SampleTank, but setting it back to 10ms improve things a bit.
2) I think SonarPlat somehow had saved its defaults incorrectly. I changed the Record Buffer number to 50 saved, and reset to 64 (+save). Same under playback, where the buffer of 250ms was first lowered to 100ms (save), then back to 250ms. I don't really understand why either of these two sonar settings should affect live play with a VST, but they did. The settings are essentially unchanged but the change/save/restore cycle clearly "fixed" something.
 
Recording and play of VSTs inside Sonar is now much better and functional.

As a final note, I noticed no differences with
ThreadSchedulingModel=2
but I have not been close to running out of CPU on any core.