Hi. When I turn down the input level on my new itwo, while using a mic, there is an audible change and the signal to the headphones stops working. The input signal still continues to the computer, with decreasing level as the knob is turned down. It's just the headphones that stop working completely. It's not gradual either, there's an on/of point in the knob somewhere around 3:00 (i.e. still pretty loud).
That sounds like a bad pot to me.