I'm a bit confuddled over how you have things set up. You mention a USB microphone, a USB interface and USB headphones. If you have an interface, the norm would be to use a standard analogue mic and standard headset, both working via the interface.
In any case, I can't think of any way to make your collection of gear play nicely together. Using multiple USB devices would limit you to MME drivers but they have more latency than ASIO.
You can try adjusting the latency downwards from 200ms to the lowest setting that works without dropouts and see if that helps but I suspect you'll still have issues. FYI, what some people do is crank the latency way down when tracking then to a higher number when mixing and adding effects.
However, the only real fix would be to get rid of the USB mic and headphones, replacing them with a conventional (i.e. on an XLR output) mic and normal headset, then run everything via the Alesis IO2 which (I've just checked) has hardware direct monitoring.
That makes more sense.
Yes, you'll be better off using the hardware direct monitoring (the quarter inch stereo jack on the top surface of your interface) rather than the USB headphones. Any standard headphones or earbuds should work--you can get adaptors if your headphones have an eighth inch stereo jack. Use the monitor mix knob (also on the top surface of the interface) to set the balance between the mic input and the tracks being played back.
Now the bad news. I just checked the Alesis web site and, rather stupidly, they don't do an ASIO driver for the IO2. It may be that, using the direct monitoring, the latency in MME will be acceptable so give it a try. If you're still having problems, Alesis recommend you download ASIO4ALL and use that as a driver--they have a link on their site or you can just go straight to the main site here: http://www.asio4all.com/
However, as I say, I'd try just using the MME drivers and the hardware monitoring first. Asio4All isn't exactly an ASIO driver (as the Alesis site implies). It's more of a wrapper to use MME devices with ASIO software. However, I can vouch for Asio4All as a good solution to many problems.
FYI, you have to go to the Audition Edit/Preferences/Audio Hardware menu and set the Alesis to be both input and output. Try it initially with direct monitoring and the latency set to 200ms--if latency is acceptable, great, if not you can vary it downwards but beware of dropouts and glitches if the buffer gets too small. If you go the Asio4All route, the menu for setting latency in that is on the Settings menu under the Edit/Preferences/Audio Hardware menu. That'll take you straight to the Asio4All settings.
Sorry I'm rambling a bit...hope it helps anyway.
Sorry, I missed those two questions.
Is Stereo Imagery totally missing or just greyed out? If it's just greyed out, it could be simply that you're recording a mono track (because that's what a mic is). Try opening any real stereo file to see if that brings it back. If the effects are totally missing, that might be a different issue and you MAY need to reinstall.
The crackling and distortion could definitely be a result of having two different MME devices (the Alesis and the headphones) running and, if so, putting everything through the Alesis should fix it.
Well, since a microphone is a mono signal anyway, even if you record it to both sides of a stereo track to fool the plug in, the effects won't do much if anything for your signals at the beginning stages.
Typically, you'd record your mic (and other mono sources if you have them) in mono, then at the mixing stage pan them around the stereo field to locate them as you want. Just as an example, maybe your voice in the centre, a guitar panned slightly left, a bass slightly right, etc. etc. Once you've created this sort of pseudo stereo, the effects start to do things--though they're not ones I use often in standard mixing.
Okay so I went out and go the headphones and a stereo jack for my audio interface. All problems seem to be solved.
Although just one more question for reassurance.
Should I be recording under MME using my audio interface? Or is the ASIO4ALL a driver FOR my interface? I can't quite really grasp this concept. Because technically thre interface is an external audio card.
And what would sound better anyway?
There are a few different driver "languages" used for communication between an audio application and the hardware. Audition supports MME, which goes through Windows as a sort of middleman, and ASIO which bypasses Windows and allows the application and device to communicate directly.
MME, which is supported by almost every audio device available, is pretty forgiving when trying to do tasks like use an input from one device with the output of another, or when two applications want to play at the same time. The trade-off for this pliability is an increased latency (it takes longer to do all of this) and unreliability between devices as everythings own internal clock is a little different, causing eventual synchronization issues.
ASIO on the other hand requires the manufacturer of your device to offer drivers. These drivers provide a very specific set of rules for communication, and generally demand complete devotion between an application and the device at any particular time. It's very fast, very accurate, and can generally handle much harder work, but necessitates some strict rules be followed.
If your device doesn't have a true ASIO driver available, you COULD take advantage of a third-party application called ASIO4ALL which provides a means for devices which do not have their own, native ASIO support to communicate with applications that require it. There are also some valid reasons to use it when you want to be able to access multiple devices from within one "shell." (Say, for example, you had two USB Microphones plugged in and wished to record each one to a separate track. ASIO4ALL would allow each microphone to appear as a standard input channel within a single, virtual device. Audition believes it's talking to one audio device called ASIO4ALL, and ASIO4ALL is handling the juggling between the two MME usb microphones and your speakers which might be plugged into a built-in output on your computer.)
If you're able to record and playback and don't experience any problems with your workflow right now, there's no need to install ASIO4ALL and configure it at this point. There is unlikely to be a difference in sound quality, though ASIO4ALL does seem to handle latency a bit better than standard MME drivers.
If it ain't broke right now, I wouldn't recommend trying to fix it.
Durin, just to clarify itzchriis's question, when I went to the Alesis site to check the features on his interface, I was interested to see that it says, in effect, "if you need ASIO, download ASIO4ALL and use it". They included a link to ASIO4ALL on their list of support downloads for the IO2 interface. I took slight exception at the way they glossed over where ASIO4ALL was coming from:
This Alesis audio interface is a plug-and-play device, which means that no additional drivers need to be installed to use it with your computer. If you use ASIO compatible audio software on your Windows PC, this optional ASIO driver can be used to offer additional configuration options such as latency and buffer adjustments.
In any case, I agree with Durin (I'd be silly not to--he writes the software for Audition} that "if it ain't broke, don't fix it" so MME might be best for you.