Digital Out Frustrations

Late 2011 Macbook Pro with 10.8.2 (not under warranty)

So I recently have been having issues with the Digital Out feature on my MBP. Periodically, the Internal Speakers option in the Sound panel is being replaced with Digital Out (which I have never used). I'm sure this has been a problem discussed before but I have discovered an interesting pattern.

I can fix the problem by removing some fuzz from a Q-Tip and jiggling it in the 1/8" jack. (Headphones in/out method never worked). This will fix the issue until I close the computer. As soon as I wake the computer, the volume is ghosted out once again.

When I use my USB Sound Card, I have no problems, just like using headphones, but when I want to listen through the speakers, it's a pain.

I know Apple suggests resetting the PRAM but I haven't heard that to work at all.

Any thoughts?