I am on a brand new Mac Pro running Catalina (10.15.7). I have been experiencing this as well, and have been able to narrow it down to a singular cause on my system.

I am running VE Pro 7 server locally on the Mac Pro, and on an external PC. I am getting a loud noise burst, which renders the VE instance unusable until I disconnect, and reconnect the instance. The noise is not present in VE, and only present in Cubase. If I Disconnect the instance, the noise will remain until I reconnect it. The VE Instance uses Kontakt with multiple outputs routed to bus channels in VE.  Those Bus channels are then returned to cubase on separate outputs.

I have found that disarming the record on a midi track is the cause. Cubase would always hiccup with VEPro when doing this, but on my new system it is causing this epic burst of noise that does not go away until you re-initialize the VE Instance.

Can anyone else confirm that this causes the issue on their system?

EDIT:  I can confirm now that this occurs with Multiple instances of Kontakt loaded with no "multiple Kontakt" outputs routed.  Additionally, I can confirm that this occurs in my session simply by clicking the record enable on the midi track, and then turning record enable off on that midi track, without any note playback.

Mac Pro (Rack, 2019) 3.2 GHz 16-Core Intel Xeon W
96GB 2933MHz DDR4 
OSX 10.15.7
VE Pro 7.0.1056, Cubase Pro 11.0.10 Build 321

Did you ever get this working??  I'm trying to do the same thing, wondering if the "self assigned ip" is goofing things up.  It will connect if I manually type in the address, but it does not show in the browser of the instance in DP7.