Let me begin by saying everything worked perfectly before I noticed my rarely-used CD-ROM was no longer recognized by my Gateway computer. My CD-ROM was giving me a Code 19 in my Device Manager. Gateway Tech Support walked me through editing my registry. My CD-ROM came back. But since then SONAR will not play or Record.

Sympton: In ASIO Mode, the "Drop-Out" icon appears when I Play or Record. In WDM Mode, it will play flawlessly, but Recording is distorted, very latent and slows down playback.

Here's what I've tried with no success:
-Checked my M-Audio Audiophile USB interface in Device Manager. It's working properly.
-Re-installed my interface's Drivers
-Tweaked the buffer on the interface
-Checked that my Sound setting in the Control panel are set to my interface.
-Made sure my Play and Record Preferences are set to interface. 

Probably tried tweaking a few other settings here and there, but no cigar. Any help appreciated. Thanks.

I had a similar problem with my gateway.  I would recommend if your asio drivers are 64 bit you should run sonar in 64 as well.  so there were a few steps i had to take with my fast track ultra...

open device manager by right-clicking the computer on the desktop, selecting manage and then device manager.  
click view on the menu bar and select show hidden devices.  
expand "sound video and game controllers"  
right-click each instance of your onboard audio and m-audio devices that are shown and click uninstall.  DON'T select delete driver software for this device, and DON'T delete any of the microsoft drivers that are showing.  
open explorer and go to your C:\Users\<username>\AppData\Roaming\Cakewalk\SONAR X1 Studio directory. 
rename your aud.ini file aud_old.ini so you can use it later if anything unexpected happens...
unplug your audiophile.
restart your machine. 
plug in your audiophile.
make sure it's working by changing its mode in the m-audio applet. 
start sonar. 

WDM Mode in windows vista and above is LEGACY EMULATION.  WDM does not exist anymore.  use WASAPI instead - it works great with onboard audio and my m-audio gear. 
don't install asio4all because it corrupts m-audio settings sometimes. 


hope that helps. 

you didnt try reinstalling sonar after the registry edit?

Restore Windows back to a time before the Dell rep helped you mess up your computer. 

have you tried re-installing your soundcards drivers?..the one you use in sonar that is ?

id start there before i did anything.

Swamptooth's idea seems the best route. Uninstall all the drivers and let them re-install after a restart.

Although with your M-Audio device, use M-Audio's installer to install the drivers as Windows may not actually fix the problem by just putting the drivers back. If that's the case, you'll need to un-install the driver software as well then do the re-install before you restart.