Microphone headset trouble with Windows XP

I just bought a headset that connects via the green/pink connectors.

I'm trying to use this headset to chat with my buddy while we play delicious StarCraft. Here's where I am having difficulties-

When I plug the connectors into the front green/pink jacks, the mic doesn't even work. What's weird is that right UNDER the green/pink jacks are two MORE jacks that are unmarked color wise, but work for the headset. I'm plugged into those now, and I can hear my friend fine. The only problem I have now is that ALL of the computer sounds come through the headset.

I want to set it so that I can only hear my friend, and that the regular computer sounds come through the speakers.

+like 4000 karma to whoever helps me out.

Typically, if you plug into a secondary speaker out (as you appear to be doing), then that cuts out the primary speaker out. What you describe is what I've experienced on both Dells and IBM/Lenovos.

OMG StarCraft IS delicious. I miss it.