Hi Ken
I had a DacMagic.
I remember having to set the bitdepth manually to 24bits in previous versions (although I thought that by 18.0.212 this issue was adressed), so try it on your setup. I don't remember if you have the choice in version 18 of 24 bit or 24 bit with a 32bit float or not ... try both see what happens. Your other settings are spot on, they will work so don't change those.
Post back if this doesn't work.
Also in DSP studio, when using the DacMagic I had checked "output format". For all the sample rates I set this to "no change" up to 96kHz; above 96, I forced MC to downsample to 96k. This will allow you to play higher rez through this DAC without getting that screen shot about not starting playback. You will also notice that if you play 48k or 88.2k, files the blue indicators will (should^^) light up with the correct incoming sample rates.
BTW : do you have an SPDIF output -- optical or coax. Sort of doubt it on a netbook, but if so give it a try. Thought both of these were really better much than the USB connection for this DAC. The DacMagic+ has an asynchronous USB, but not the older DacMagic