I have a Roland Duo Capture Connected to my PC and using a midi controller to Sonar. In and Out are set to Duo Capture.

I can hear myself and others using Headphones on the Duo.

I'd like to verify my setup is working and volumes are set appropriately.

I use a Beat Buddy to practice. Could/Should it be used with the Audio into the Duo

That sounds fine.

Please note that anything happening in Sonar will not be audible to other jammr users because jammr is a separate application and audio isn't transferred between the two programs. I recommend not running Sonar at the same time as jammr. jammr supports VST and AudioUnit plugins if you wish to run virtual instruments or effects.