Right so i wanna buy a Midi controller USB key board but im concerned that i wont be able to create midi pieces in cubase and it's only gunna work as a normal instrument not a software instrument if im making any sense :L
i'm not sure i understand your question... but i'll take a shot at it anyway.

A lot of MIDI controllers do not have any sounds in them, and even the ones that do, when you're recording midi all you're actually recording are a bunch of 1's and 0's. those tell the computer things like which key was pressed, how hard, for how long and lots of other things. it's up to your computer and software to provide the sounds. so yes, it would need software instruments.

if you're getting your sounds from your controller/keyboard, you're recording audio, not MIDI and that would be through 1/4 inch cables and not a USB cable.