When I have both of my microphones connected, and the game set for two active players, the lyrics lag behind the actual music.
Update: the song itself seems to be working fine. It's the microphone playback through the speaker that lags, though its response is instant anywhere except during a song, and it only happens when both mikes are set up and two player mode is turned on.
That I can (probably) help with. We had a similar issue (http://www.mylittlekaraoke.com/forum/index.php/topic,323.0.html) with a single mic back a while ago. You can try muting the mic feedback in Ultrastar and feed it through a program called Audio Repeater.
Or Virtual Audio Cable (http://www.ntonyx.com/)