Hey,
If you have 5.0, I don't think Reason will work, only Rebirth.
Yes, I remember the 1.0 release of SX, recording MIDI was an absolute nightmare, I was pretty angry because I spent about $150 for the upgrade from VST 5.2. They're up to 1.06 now, things are a lot better, you should upgrade.
Good VST's? The only ones I run on my machine are Reaktor and Kontakt by Native Instruments. Most of the time I just use my hardware synths, but sometimes it's fun to mess around with sounds in the VSTi's, especially Reaktor which allows you to build your own effects/synths/samplers.
The only DX plugins I use are the Waves ones, but most of the time I'm happy using the ones in SX and Cool Edit
Take care,
Nick