After HOURS of struggling with the Tea Towel drum kit and various friendly but ineffectual suggestions from WaveFactory support, I finally got the thing to work.
The problem was not Cubase related, as the support person so unhelpfully suggested. WaveFactory's set-up instructions for configuring Kontakt outputs simply omitted the crucial detail that you had to then go into each of the outputs and point them to physical Kontakt outputs. Once you do that, the thing works.
I've attached a pdf that shows two ways to accomplish this. Tea Towel Drums how to map.pdf
Inexpensive samples are a wonderful thing. WaveFactory is to be commended. But, their documentation is either entirely missing (as with Fab-Bass) or fatally incomplete (as with Tea Towel Drums). IMMHO, if you're going to sell a software product, document it adequately and make the doc a part of the download. That's what everyone else does. They should too.
In the case of Tea Towel, that also means providing a table mapping midi notes to drum articulations. For Fab-Bass, that means a table wih the same info for the gliassandos, pick noises, etc. Maybe even provide drum maps for various hosts. Again, everyone else does that. So should WaveFactory.
These guys deserve an A for samples and and low cost but an F for documentation and support.
BTW: So far, the samples are running fine in Kontakt 5 running under XP SP3. Kontakt 5 is not officially supported under XP but no problems so far.
Hopefully, this post will save someone from the aggro I went through.