No I can't hear any sound coming from Analog lab except if I put it in direct input,
I don't know if you can use a USB headset. Do you have a speciel driver for your headset In the Device dropdown menu you see in your screenshot?
The selected windows audio does drive your onboard soundcard. That's what you mean with Direct input - using the onboard soundcards mini jack output?
The delay you exsperience is latency. I don't know if your sound drivers and PC can get the latency you need for realtime playing.
Have you tried normal headphones?
Perhaps you can get better latency that's enough for you using ASIO4ALL. I don't know if it can be used for your headset.
http://www.asio4all.org/1-2 sec delay is very much. You should be able to get much much better. But perhaps it's mostly about your headset. I suggest you try a normal pair of headphones using your onboard soundcard. What happens?
Perhaps you need another solution using another soundcard with fast drivers. But what you can do is also a matter of how strong your system - especially your CPU is. So your computer specs is also important.
I suggest you read about latency.
Did'nt you have the 1-2 sec latency yesterday?
How was you connected, when it worked yesterday?