40mV is not right for a headphone output! The line output should be 1-2v p/p and the headphone output up to a few volts, and a 16 ohm headphone set should pretty much blow your ears off if it is turned up fully. Do you have some headphones/earphones around?
If you are getting 40mV p/p on the scope from the headphone output, how many volts p/p do you get from the line output plug?
Also what is generating the audio signal to the soundcard and does that have a volume control? Maybe it is turned right down?