Verified answer

It could be a software/driver problem, but i doubt it.

Its likely a bad headphone jack or bad circuit board

Luckily the jack isn't part of the motherboard, but on a tiny circuit board connected to the motherboard, so u can just replace the circuit board. search on ebay "compaq c500 audio" and you should find the part u need. Or maybe the cable is just loose so u won't need to buy parts for it.

It's a bit of work opening up the laptop though, u can find the repair manual in the source link underneath. I won't be responsible for you breaking anything while trying to pry it open though :)

Reinstall up to date drivers. If that dont remedy,

Go purchase audio card to replace integrated one.