Any question answered...

VM is not the problem.
VM was an experiemtn to see if moving to 32-bit Windows made a difference.
The laptop is running Win7 x64 native.

It's also a laptop which means no new soundcard or video card and the sound control stuff is all outboard in the A&H DX anyway. It's DirextX kernel driver that is causing the latency but how to get around this?

When I say soundcard, I mean 'audio interface' so a USB or firewire audio interface from the likes of m-audio, echo, etc etc.
Native windows audio is notoriously bad for latency without custom drivers written for specific audio hardware.

what's the A&H thing? allen&heath dj mixer? does this have an audio interface or just used for mixing?
you could try ASIO4ALL drivers too, they might help, but it's going to a kludge solution.
I'd suggest getting the NI traktor USB audio interface thingy.