streaming audio between PC's?

There are a number of free tools to stream audio on a small-scale basis. Microsoft has one, which the Windows Media client knows how to connect to; that might be all you need. I used it a few years ago to get audio from one end of a hotel to another through a WiFi link.

Shoutcast is a somewhat more serious solution, still free -- but that generally bounces the audio off a third machine (sender/server/receiver configuration), which seems a bit more complicated than you're looking for.

There are others. Websearching "streaming audio server" will find them; that's how I first found those two.

HOWEVER: Let's go back to the actual problem for a moment.

Your original mistake here seems to be that you tried to feed headphone-level audio out to _microphone_ in. You need to feed it to the _LINE_ input jack. Or, if your soundcard doesn't have line input, you need to attenuate the signal down to microphone level. Otherwise you're overloading the input preamp and you're guaranteed to cause distortion. Attenuation plugs are available from Radio Shack and the like; basically they just put a sufficiently large resistor in series with the signal. (I forget the exact value; a bit of websearch should answer that too.)

If, after fixing that, you still get 60-cycle hum on top of your signal, that's probably a Ground Loop problem. This happens when the two pieces of equipment are plugged into different power circuits in the building. An isolation transformer can be used to solve this problem... or you can just make sure everything is plugged into the same set of outlets. (Or, given your setup, you can unplug the laptop and run it off batteries for the duration.)

If _that_ doesn't solve it -- if you're picking up a local radio station or something of that sort -- the only answer may be shorter cables and/or to not use the mike input -- which brings us back to the recommendation that you use line input.

Sanity check question: What are you actually trying to accomplish here? Do you really need the audio going from one PC to another, or just from a PC to a remote amplifier and/or set of speakers? The latter may be a lot simpler to set up.

Seconded ork's suggestions -- use 'line out' if you have one, and/or line in on the other end.

Turn the output on the laptop WAY down (to about 25%) and the tv to no more than 50%, then use the actual stereo to amplify. If the TV has the option, use 'passive audio' or the like that makes the tv line out exactly the same as the line ine.

Software, pretty much anything you 'stream' will have a lag, which is no good for you probably, unless it's just for music.
Winamp has support for 'shoutcast' servers. I recommend AnalogX SimpleServer: Shout. Free, and 1 button operation.
Basically, you use winamp to play your music, (or mix in a line in from microphone and stream that, etc), and change the output plugin from 'your speakers' to 'the stream server'. From there just point the audio software on the other machines to the IP address of your laptop, bam, network audio. Quality is controllable, and over a local network you can afford to use extremely high quality without a lot of network traffic.

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.  If you want to go the audio cable route, you can get an attenuating audio cable at most electronics stores.
.  Personally, I'd just set up file sharing (Google yourOS file sharing, eg, "Windows file sharing", "Linux file sharing") and use standard Ethernet crossover cable.
.  You should be able to find instructions for all that right here at Instructables. Google The search bar is your friend.