Dear Mark
I would like the following explanation (or the like) to be put into the XG Manager manuals. If you agree, you can delete my previous posts as to XG Manager not working.
XG Manager can be used with a single-client MIDI output driver (such as the Microsoft-supplied class-compliant USB-MIDI driver) provided that system-exclusive commands (such as XG System On, XG part data, XG effects, QS300 voice data) are not used. If they are, then you will need either a multi-client MIDI output driver or an external (hardware or software) facility to merge the MIDI Thru output with the XG Synth output.
I have ditched my cheap 1-in, 1-out USB MIDI interface for a more sophisticated 4-in, 4-out one with downloaded drivers. I will report back if it all works.
More people have reported cheap hardware as the problem than software connections. That's all from me on this topic.