If it's any consolation, my Cubase SX3 works perfectly well under 32 bit in all builds that have made it to public.
The dongle app referred to, I have set to not do the default startup with Windows. I prefer to run that only when needed - when I am going to start Cubase.
I ran into a problem once. I uninstalled and then reinstalled the driver
in device manger and from the hard disk. Hopefully you too will have same results. If not, consider doing what I just said and also uninstalling the app that needs it. Then proceed completely fresh with an install of the software and dongle driver.