This thread is a year old, but since it still comes up in a search I'll give my February 2012 advice:
Computer: iMac 27" Intel based all in one
'''Issue: Internal speakers work; headphone jack does not. '''
Seems to me, it is easy to bend the inside connectors, fry the jack itself or otherwise simply break it. You can click all the settings, preferences, and MIDI controls you want - it will not correct the problem. You're a Mac user, you know you have tried all the settings and are second guessing your own expertise. So here's the problem: your headphone audio jack is cooked. Get over it.
Solution #1 (expensive): take it to an Apple store.
Solution #2 (inexpensive): get a USB to stereo audio input off Ebay for $2.00, wait 3 weeks for it arrive from Hong Kong and use your headphones through it.