got it fixed using paperclip w/tape
Had the same audio problem...
Symptoms: no audio from internal speakers, pressing volume control buttons displayed a circle with bar thru it, system prefs showed digital output... and original headphones worked fine and controls worked when plugged in..
First thought it may have been software problem or settings adjustment or my addition of third party software as i had recently downloaded and been using Boxee alot lately and maybe something got out of whack.
I read the previous posts and saw the toothpick workaround..
Saw the red light glowing inside the headphone jack... which i learned was the optical digital output.. which i didnt use but im guessing somehow got triggered..Possibly because i was regularly plugging and unplugging a connection to my audio for my Boxee setup..
Since i was at work, no toothpick available... I took a paperclip, wrapped plastic tape around the end (didnt want to put metal inside the sensors inside there) gave a bit of a tape overhang on end of paperclip and bent that portion of the tape so it had a tiny 90 degree crook at the end of the tape...
Wiggling didnt work.. pushing in and out didnt work.. then turned and and made a circle inside the best i could thinking i could reset a sensor.... when i pulled out the paperclip.. saw the red light had gone off... looked at my tape wrapped paperclip.. and low and behold.. dirt/dust was stuck to it...
Everything back to normal.. volume control works.. internal speaker now detected in system prefs etc... all is good in the world