Aero runs under Vista runs using the GPU on the graphics card if there is one, not the cpu  - basically the same way the Win7/8 interface is run.
 
Disabling Aero in Vista, assuming the graphics card is up to handling it, and pretty much all pci cards are (even my several years old 2GHz laptop's on-chip gpu can handle Aero) can actually reduce Windows performance/add to cpu load. In any case the X1 interface itself is pretty graphics intensive.

That 5 years old 2GHz Core2Duo laptop can run around half a dozen stereo tracks in X1 without a problem (never tried any more than that though). However, that's without cpu intensive plugins or input monitoring via X1.
 
This problem sounds like typical dropout issues from how it's described. I agree that the biggest issue here is quite possibly lack of native ASIO support for the interface, though maybe dpc latency issues or over-optimistic ASIO buffer settings are involved as well.

What happens if the ASIO buffer size is increased? Do the problems continue?

Thank you so much for your feedback.  I have a lot of ruling out to do and I have begun.

Firebird - DPC Latency Cheker V1.3.0 Output (without Interface connected) Result - This machine should be able to handle real-time streaming of audio and/or video data without drop-outs.)   After a few minutes it outputs: "Some device drivers on the machine behave bad and will probably cause drop-outs in real-time audio and/or video streams.  To isolate the misbehaving driver use Device manager and disable/re-enable various devices, one at a time.  Try network and W-LAN adapters, modems internal sound devices, USB host controllers etc.  (I connected to wireless when this happened.  Im not entirely sure if this was the cause yet.)

Bob & Dave -  
Video - I'm just using the built in video card - NVIDIA GeForce 8600M GT - My current display driver does not allow changes to be made to hardware acceleration settings (Vista has it disabled).  
Appearance Settings - I have Windows Standard Display selected and not Windows aero. Sweetwater optimisation pointed me to more aero effects that I disabled. 
Effects - I didn't have any effects on audio and the problem still existed.  
Freezing - I also tried freezing the midi track but noise followed a few seconds into recording the audio track (with midi playback). 

Garrett - This will be the final step

Beepster - Im getting through the Sweetingwater Vista tweaks bit by bit, thanks.  After carrying out the performance tweaks, the problem is still there.  There are still more tweak steps though.

Interface:
A lot of you are pointing towards my interface so thanks for this tip.
Guitarhacker - I can't bring it back because I originally stole it. No just kidding. I had bought it second hand but Im hoping to borrow one with a native asio driver to see if it is the issue.  I will let you know how I get on.

Cian - My marbles went missing a long time ago.

Thank you again for your help.
Paula.

MY RECOMMENDATION: If the interface is new (under 30 or 45 days depending on the retailer) carry it back and buy an interface which supports NATIVE ASIO drivers, not one that suggests optional ASIO4ALL...... 

As was mentioned, first test your system's DPC latency (not to be confused with audio latency).
Ideally, you'd like to see idle DPC latency in the sub 25uSec range or lower.
The lower the audio latency you wish to effectively work... the more critical it is that your machine's DPC latency is low/consistent.
IOW, If you machine's idle DPC latency is 400-500uSec, don't expect to be able to run substantial loads at a 64-sample ASIO buffer size.

Aside from the PC itself, the next most critical component for a rock-solid DAW is the audio interface.
Go with a unit that's a proven rock-solid performer... and you'll never give it a second thought.

Also, benchmark your HDs to be sure they're running properly.
If one of your drives slips into PIO mode, that'll absolutely kill performance... and can certainly cause dropouts/glitches/etc.

Yeah, ASIO4ALL is good for hacking around but it just doesn't cut it for anything intensive. You might be better off just using another driver mode altogether for now.

Is this the unit?

http://www.alesis.com/io2

I am not seeing an ioS2. Only io|2.

Anyway I poked around a bit and it supposedly is "plug and play" with no drivers necessary which is pretty... um... funny? And then as you said it recommends using ASIO4ALL if any issues become apparent. Well that doesn't seem to be working for you sooo...

Try switching the driver mode in Sonar to WDM or MMe. I've always used ASIO so I don't know what exactly those do or whether they will work but it's worth a shot to keep you moving until you get something better.

I think you can access those by going to Edit > Preferences > Audio - Playback and Recording and change the driver mode. 

Again... I don't know if that will work but it might. Seriously though... that Alesis does not look like a very good device.

You can pick up something by Focusrite or Presonus that has the same i/o capabilities as the alesis for a little over a hundred bucks and they will use ASIO as well as give you good performance and recording quality. If you have a little more cash to throw around and want more i/o options then there are tons of excellent units out there so just ask and you'll get some quality answers from the kind folks here. It would help to explain what your needs are as far as recording and what kind of budget you have to narrow it down to the appropriate choices.

Good luck.

Beepster, sorry, that was a typo.  My interface is an io|2.
I have just borrowed another interface - M-audio Fast Track C400.  Driver mode Asio.
I just quickly recorded 3 audio tracks with no crackling at all :)

I have yet to record midi with it.  The M-audio interface is not coming up as an Input Option for the midi track.  I only have one midi cable from (out)keyboard to (in)interface (need to purchase another).  Is it always necessary to have the interface midi-out also going back to keyboard.  This is in the manual for setting up midi for the interface but is it really necessary for recording? 

Given the audio results the Alesis Interface was the issue.   I will see how the midi goes.

Thanks again for your help. 

Paula.

Excellent. Glad to help.

So are you attempting to record the sounds from the keyboard or do you just want to trigger the softsynths in Sonar? If it is the former I unfortunately cannot help you with that as I'm still trying to learn that stuff myself. If it is the latter and you just want to use it as a controller let me know what keyboard it is.

Does it have a USB connection? If so you are better off using that. If not I'm pretty sure that you just need the one cable hooked up to the MIDI out of the keyboard to the MIDI in on the interface. 

Also for controlling a MIDI performance it isn't like with audio where you select an input. What you do is make sure the controller is hooked up and being detected by Sonar then when you have a synth inserted and routed to the desired track you make sure the MIDI Echo button is engaged and the keyboard should control it automatically. There is a different setting though where you can control multiple tracks at once where you have to manually enable the MIDI Echo on the desired tracks. I've actually just been learning all about this this week.

But... let me know what the keyboard is and I'll see if I can help you.

Cheers.

Sorry... technically there is Input/Output but it's coming from within Sonar so unless you have multiple controllers you shouldn't have to worry about selecting the keyboard.

In fact give a detailed description of what exactly you want to do. If I can't help some of the veterans here should be able to. 

Hey Beepster,  beginners mistake.  I had not set the Midi device in Preferences since I'd swapped interfaces.  Once checked, it became available as an Input option.  You are right, only one midi cable is needed for recording.

(My set up: I have a Korg SP250 linked to my interface via midi cable (keyboard doesn't have USB.  I then Insert Synth vst - Kontact in Sonar)

Thanks again for all your help.  There is no crackling with M-Audio so far.  Happy days in the hit factory as John Spillane would put it.
Paula.