yes you load the midi file ensure its a midi format 1 file and then open it and edit to your hearts content adding what efx you like, then send it all back from your midi out to the yammi and THEN record it thru the fostex as a l/r stereo file, or as individual tracks...the seqencer will allow you to send pan controls to each channel via the PC, so, ergo you could record drums left and bass right, then when thats done record gtrs left and keyboards right, then import those tracks into you audio program and add dsp efx eq'ing or whatever then bounce these down and then record your vocals the same way, as a mono dry file then import back into the pc for processing.
there are a few free ones out there, one in particular which does midi and audio is from the computer music magazine in the uk (comes complete with VST synths, drum machine eq efx etc etc etc) i will check on the site and see if it is downloadable, (it comes on the cover dvd every month "CM Studio" its called.....will let you know
cheers
dennis