Hi GG,
If it is still happening with the built-in audio then it is not a problem with the Rosetta audio interface.
I suspect it is a hardware problem somewhere on your Mac. Seeing as it is a CPU overload and a MIDI/Audio sync problem, it could be a hard drive issue.
Have you been having and other issue like the beach ball popping up quite a bit while you are using the Mac?
Try maybe running a maintenance application like Onyx first and see if this helps at all.
Take a look here on what to run with Onyx:
http://www.macprovideo.com/hub/mac-osx/9-mac-troubleshooting-tips-call-mac-guy.
If it doesn't improve after the Onxy maintenance, will then need to run some diagnostic tests on the Mac to see if all the hardware is okay. Do you still have your Apple system discs? there is a Apple Hardware Diagnostic Test on the discs you can run to check the hardware.