Please remember to reset and rescan your plugins after the reinstall, it took me three separate scans after I installed Melodyne to get it to show up in region effects.

Thanks rebel, again this is something I had already done, a few times. I think there is just something "broken" in Sonar on my system. Melodyne runs fine in standalone mode. But it does nto appear under the right click VST 3 folder, and of course as a regional effect either.

Is the VST3 version in Plugin Manager?

Well, I just did a re-install of the OS (from an image file which has the full install of Sonar + Melodyne among others) and now Region FX are enabled and Melodyne in the VST3 folder is appearing again. So some program that was installed after that image file was created broke it...Now I just need to figure which one...I REALLY hope it was not Addictive Drums 2. Anyway I am hoping it is some other non music related app. If I find it I will report back.

couple of questions: Are you using any VST3 plug ins? That, I believe, is the protocol for Region FX to work. (they use ARA to eliminate the need for transferring files to the plug, such as melodyne used to require. I ran into this. )
Ishould mention that you may have to hunt for your VST3 plugs and tell Soanr where to look for them (under preferences/ VSTs)Sonar does not specify a location for them.
 
Also, please update to X3e, it is the latest and will cut down on your problems list as some of the other issues you may stumble across may already have been addressed in the update. 

Actually Sonar is on 3c (as per the image file) and Melodyne is running fine with NO update yet to 3e ....I got a "sorta" response from support, which just said " ...see you have it sorted, contact for further assistance" so I assume from that, they simply looked at the thread. NO explanation of the initproc error message, even though I gave them a screenshot. Anyhoo I wrote back asking for an explanation of the error message...doubt I'll get anything back.
 
I have a feeling it was AD 2 that broke it...it must alter the C++ libs somewhere (or the APIs)?? I ahve re-installed pretty much everything except AD2 and it is working exactly as it should, even under 3c as noted.

FWIW, ARA/VST3 was introduced in X3 so yes, you shouldn't explicitly need X3e to run Melodyne - I'm not surprised that it's OK in X3c since I (and many others) were using that combination before "e" was glint in a bakers eye.  
 
The initproc message does smell a bit like a c++ mismatch somewhere along the way.  Found another instance of it here: http://www.digifreq.com/digifreq/discuss/topic.asp?TOPIC_ID=9343
 
 

Thanks Steve I will check out that link...might provide a glimmer of , well, something
 
EDIT: nah nothing much there. FWIW I do think it is a C++ issue, but it's in the finding WHAT exactly caused it that is the problem. Still nothing from CW, I did ask the guy who responded. I guess they put these things out of sight out of mind if they think an issue resolved. No follow up even when asked. They are pretty busy I guess.

In preferences VST plugins there's a checkbox for how to handle a situation where both VST 2 and VST3 versions of the plugin are installed.

In this case you want the VST3 version. If the checkbox is not ticked the VST 2 is used even though both installed.

The VST3 migration settings have nothing to do with Region FX. Currently two plug-ins are set up as Region FX, the VST3 version of Melodyne and the DirectX V-Vocal.