To elaborate, when I upgraded, same as you from SD2 to SD3, the kit would show in the pre set menu but  there was no sound. 
Did you try loading a fresh new kit? this is not clear if you have tried this yet as that is what I had to do and then all was good.  

Hi Sock.  I'm not sure if i tried to do that correctly.  I was scared of deleting the track by doing this.  But then  DUH....I have the song backed up so maybe i could try that.  So to do this, i wouldnt delete the midi track no?  I try delete the kit?  
Hi Bob.  I think i sort of tried that.  Here's what I did.   I installed a new SD midi track (blank) and then bounced the troublesome track to the new one.  Is that how it's done?  It was still silent anyway :(

i would insert a new copy of sd with a midi track. then, copy the old midi track to the new one and archive or remove the other instance of sd.
 
save this as a new project file. should be good to go.

I was talking about inserting a new midi track, connected to a new instance of SD3, routed to a new audio track, and the midi clips from the old midi track copied and pasted to the new midi track.
 
Perhaps there is a better way to do it - but I was thinking it would preserve our original midi data but lay that into a new midi and audio track, with a fresh instance of SD3, and maybe whatever is interfering with the sound is some kind of weirdness with the old tracks.  (which would hopefully not have the same issues in the new tracks).
 
Just a thought - I had done similar things a couple of times in the past, successfully.
 
Bob Bone
 

Your project should still have MIDI data in the track, even if SD3 appears not to be "loading." Simply loading a kit with SD3 will give those MIDI notes something to "fire." When you open that project in X3e (please be sure to upgrade to the latest patch), immediately save it with a new name (with X3 in the title), and work from there.

Thanks guys, some good suggestions there to go on :)

Some slight progress guys.  Added in a new SD3 as suggested and added in a drum kit.  opened the "drum kit" window and clicked on a couple of drums...horray...sound.  Copied the original track into the new drum kit and then deleted the old "faulty" SD.   I now have drums again.  Sadly, I dont have the same sound.  I'll have to go through each drum and load a drum sound i like.  I hope i dont have to do this with the other songs but i have an awful feeling that is what I will have to do  :(      If i could create a  nice sounding kit and save it , that would be handy. 
But hey, at least I've made a bit of progress so thank y'all for the great tips.  Wonder what the hell went wrong in the first place.   This all started with an error saying the SD2 plug was not detected when i opened Sonar the other night.   You would think that once I scanned the VST folder it would have fixed the issue.   Even after installing the X3e update and rescanning it didnt fix the issue. 

Looks like you got the solution Did you RESET then rescan the VST's as recommended in 2nd post? (Not just rescan)

Cheers...

I did Alex.  At first i just did a scan but as you suggested earlier, i then did the reset.   The problem is definitely coming from the old SD2 from what i can see.   The only song not affected was a new one I did after the upgrade.  I'll keep digging to see if there is a way to fix all songs in one go.  Although the steps i took to fix this song worked, it's a lot of work.  I dont suppose there is any point in me replacing one of the faulty songs with a back up version from my external hard drive?  Something tells me its not the song that is faulty but something either with sonar or SD2.

The different drum sounds are probably because SD3 isn't using the same kit and sounds SD2 was. Assuming you haven't deleted or uninstalled the SD2 content it's a matter of pointing SD3 at the SD2 kits and sounds. The SoS article Mr Anderton links to should help you out.