Tom, What you posted makes perfect sense to me, but I'm not having any luck. It almost seems like the problem lies when I use jet aircraft. I've tried it with the Level-d 767, the PMDG 747 and Md-11 and the sound always reverts to the headset. If I use a prop aircraft, Default Cessna 172, Real Air Duke,or the Quest Kodiak, the engine sound comes from the speakers and the voice goes to the headset. Here are some pics of my sound settings. Click on the thumbnails for a better look.

Your picture looks backwards. You have voice to the speakers and sounds to the headset. You want voice to the default device (which should be the headset) and other sounds to the speakers.

Tom, I switched it around and now my engine sounds are through my speakers while all cockpit sounds are through my headphones. Not perfect but a lot better than what it was. I appreciate your help.