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Interesting. I've got a pair of Shure E3's and seem to work fine. Perhaps you can try with another pair to make sure it's not the headphones?

Plug in your headphones.. right click on speaker icon and select playback devices. Headphone should be enabled. Right click and make it your default device. Now when you plug in your headphones, it will switch back and forth properly. At least that worked for me. Good luck!