Illbaz,
On a default system audio/midi setup is not used just for internal speakers, headphones.
"No luck, master is still greyed out in the audio/midi settings."
This is the default, master is greyed out, can't move it. This app gets activated when you use an external A/V device or 3rd party app! You can change the configurations.
"The problem occured when I was watching a movie on my MB & once the film ended I unplugged my headphones and shut the MB."
Always a good idea to make sure no sound is playing during inserting/removing audio plug. You can cause direct short on circuit. I have done A/V work professionally for a couple of decades. Had a salesperson blow up some active speakers while demonstrating different pairs. TRS plugs will short contacts as they insert. This may or may not be the problem. Need to isolate hardware (apple repair) from software issue.
Here are some things to try before you cry... Backup your computer before restore/terminal work.
Try cleaning the audio jack, old sound trick is to moisten the TRS plug and insert/remove a couple of times and then try playing sound.
Have you tried using different user account?
Tried safe boot? ....This will shut off extensions
System restore? .....This rebuilds certain components
Booting from a clean Lion OS from external drive? ....I always keep bootable drive with each system, USB flash drives very convenient now. If this works then reinstalling OS or upgrading to ML, should be permanant fix.
If booting from external drive doesn't produce sound, your chip is toast or possibly just the audio jack. I think the sound chip is integrated on MoBo for this computer, not sure if jack is replaceable, check iFixit for your exact model computer. If chip and jack on daughter board then $$ saved.
If you can get sound from any of the above actions, then we can fix the issue.
Relaunch core audio via terminal.
Remove extensions, sound plists, etc...
Let us know, best of luck