Ya... I'm always good at bug reports...
So much so I think most authors hate me!
You need to make sure you actually have a MIDI device in your computer. I.e. you said you were using a Soundblaster Live....someone suggested that the MIDI part (MPU-401?) might have been stripped out of your version. Might want to check that.
Even so, if you are using Windows XP or beyond, isn't there a software MIDI module built into Windows? I don't use it, but I remember that when I use MIDI software under Windows XP, I can either direct output to the MicroSoft MIDI module (can't remember what it is called) or my real MIDI hardware.
Anyway, WinUAE is great for MIDI. I use Bars & Pipes and other MIDI software through WinUAE. It's pretty good. My MIDI interface is built into an M-Audio Audiophile 192 sound card and works well.
I think if you use something like MIDI-Yoke (freeware) or MIDI-OX you can even sync audio recording software running on the Windows side with Amiga MIDI sequencers via MIDI Time Code or MIDI Clocks and use the two simultaneously.