1. Upgrade refers to the price only. The X3 "upgrade" is the full product. No prior installation is necessary. There will be a plug-in or two that are no longer included with X3 (ex. Lexicon Pantheon) which can be installed from your older disks using the advanced install option, if you want them back.
2. Don't worry about the interface not having a MIDI connection. A MIDI-to-USB adapter or if you feel rich I am sure the unit from GC will work fine.
ASIO vs WDM. They are different drivers provided by the audio interface manufacturer. The rule of thumb is try them both and use whichever works best with your system. There is a setting in
Preferences > Audio > Playback and Recording to select the recording mode. With ASIO, the recording latency is adjusted with software provided with the interface. With WDM, the adjustment is made directly in SONAR with the buffer size slider in
Preferences > Audio > Driver Settings.