Record and play audio with headphone/mic jack?

My laptop is running windows 8. It has a combined headphone/mic jack. I need to do two things. The first is to play my ipad through my computer speakers and the second is to record audio from an external audio device. I have selected the box for "listen" under my mic setting so it should play any external audio device that's plugged into the computer. It doesn't work. All it does is play sound from the external mic through the speaker not what is plugged into the computer. I have also tried recording through audacity. I selected audio input but it only recorded from the built in mic again and not what is plugged into the computer. I am using a 3.5 mm mini jack. The same one I use to play my ipad over my car speakers. I'm wondering if this could possibly be driver issue? Can I not record and play external audio because the headphone and mic jack are combined? The process works fine on my desktop but the headphone and mic jacks are separate.