I use an audio interface and it works really well. They are not cheap but if you search Ebay you should get a good deal. Here's what I use:

Tascam US428 - it interface with Cubase (SX and VST), so you can rewind, forward, use the jog wheel, faders, EQ etc directly without having to mess around with the mouse.

You can jack your guitar lead directly into the Tascam which then goes via USB into your laptop/pc. The US428 acts as an external soundcard too so there are no latency issues (unless your laptop has a very very slow processor).

Check it out at www.tascam.com
Good luck