Stereo Mix

I use Windows Live Messenger/MSN often for video chatting more than anything,
which I enjoy. What Video Calling allows me to do is to not only talk face to
face, but also share what I'm listening to with that person.

What I do is set my Realtek HD Audio Input to stereo mix at full blast.
Then, I turn up "Front Pink In" slider to max, which redirects my microphone
input to the output, or my headphones.
I configure the "Audio and Video Setup" to use Realtek HD Audio Input for
the microphone.

When I video chat with my friend, what usually happens is that any sound I
hear, including my voice and any music I'm playing. However, my friend
periodically reports that she can no longer hear my music after a few
seconds, that it fades out quickly and can now only hear my voice. I blast my
music and spam other sounds on my computer, but as evident by the green
indicator on the chat window's mic volume slider, none of this sound is being
transmitted to her.

After running Audacity and recording through Realtek HD Audio Input with
stereo mix, I can play it back and hear my music. I run the "Audio and Video
Setup" and can see that the green test indicator under "microphone" reflects
my music and computer sounds.

This sometimes happens with an external microphone/loud speaker setup as
well. My suspicion is that MSN filtering the audio input before sending it to
my friend, perhaps in an attempt to eliminate reverb. However, this does
cause problems if I would like my friend to hear what I hear.

I have two questions:
Is Windows Live Messenger indeed filtering my input before sending the audio
to my contacts?
If so, what can I do to achieve the desired effect I am looking for?

Thank you for your time,
-Jonathan Lo