I'm getting low on ideas now. I really thought we were getting somewhere when the 3k was indicating "data received"

I wouldn't like to make a call as to whether its a driver or cakewalk issue, but you could try the "deinstall the lot and start again" route, which I've just done on my "getting better but not finisherd yet" broken PC, with no problems.... other than the standard issue that using the MusicSOft Downloader" seems to set PSR3k playback volume to zero internally. Therefore I always turn the 3k off then on again after using this deeply uninspiring piece of software.

And does the "Musicsoft Downloader" work at all? If not then this points straight at the driver.

Does Cakewalk drive the internal PC synth OK?

In Cakewalk I only ever select a single midi output (because I only ever have one external sound device attached) so I would make sure that the "Midi Output" selected is Yamaha USB Out 0-1 when you want to send data to the 3k.

The midi input selection is irrelevant for playback.

Have fun (again)