I think I got it going, but am not sure:
There ended up being a way to switch the mic input to a stereo mix using windows and also the software that came with my sound card drivers. I verified it was stereo after putting this together.
So, first I stripped the stereo extension cable and found 2 wires in a copper sheath (I was expecting 3 wires). The sheath was ground. It was easy to verify the other wire connections to the 3.5 plug using my multimeter.
Instead of soldering immediately, I decided to just build the voltage dividers on my breadboard, so I could play around with resistor values. I wanted to make sure I wasn't going over the limit for my netbook (ASUS 1000he). The other site referenced above by Windadct suggested 0.7 so I went with that. I was using a 9V (which was actually closer to 7V) and so ended up with resistors of 10k and 1k.
I attached the wires from the stereo cable to the voltage dividers on my breadboard using alligator clips. Then for the "probe leads" I just used some jumper wires.
I then built an astable 555 timer leading into an LED. My RC components affecting the flash frequency were 33uF and 10k ohms. I put one lead of the probe next to the anode of the LED and the other on pin 1 of the 555.
I plugged the stereo cable into my computer and set up goldwave to start recording. As soon as I powered my circuit I got quite a surprise! My computer made the same sound as if I had connected an 8ohm loudspeaker to my circuit where the LED is. That makes sense, but still it was somewhat shocking. This however was with different RC values, when I changed to the ones mentioned above it became inaudible, but I could still hear small clicking that matched my LED lighting.
I printed the screen to show you.
I'm not really sure this is as it should be, especially the huge spikes. My digital multimeter seems to max around 0.5, is it as simple as the vertical axis in goldwave being voltage?
I would be very grateful if someone could build the same circuit and test with a real oscilloscope. I will draw my circuit in circuitlab and post later.