hi @david-t - I don't know much about midi editing in Acid, but as far as I can tell Acid operates on Midi in and Midi out, so I'm not sure what the VST vendor was going on about. I can see from your other post that you're trying to get Xfer Cthulhu to work, which is good news, as I have tried that in a different DAW in the past, and was able to get it working in Acid.

Here's how

1. For a midi track there are midi in, and midi out options. In the image below, the left icon is midi input, and the right icon is midi output
   
   If you don't see the icons make the track controls pane wider. Also, if you make the track taller you see a slightly different view, but the icons are the same. furthermore, you can select midi track inputs/outputs by right clicking on the midi track
2. Create two midi tracks.
3. On track 1, click the output button, a soft synth should be loaded by default - leave this, or replace for another soft synth.
4. On track 2, click the output button, click Insert Soft Synth, and select Cthulhu
5. On track 1, click the input button, by default it is set to Auto, change that to the output on channel 2. Cthulhu.

That's it for the routing. Next, let's make some sounds.. We're going to feed some long notes and feed them in to Cthulhu's Arp function, and get a nice arpeggiated set of midi notes out

1. On track 2, on the timeline, inset a midi clip
2. edit the clip and insert some long notes
3. put the cursor on the timeline, hit play
4. the notes in the clip on track 2 will be input in to the VST, be processed and turned in to areggiated notes, and then output to the midi input on track 1, in to the soft synth on track 1, and then output as audio.

To record the midi output

1. Arm track 1 for recording
2. Move the cursor to the start of the clip on the timeline
3. Hit Record, or Ctrl+R

you should see a midi clip appear on track 1 with affected midi notes, which you can then edit, tweak automation on, etc.

good luck! Also, Cthulhu is a bit of a pain to get working in the other DAW I've used, so don't feel too bad about it being a struggle to get working in Acid.

edit: updated to reflect the fact you're also trying to use Cthulhu