[SKI]

Try to understand what he told you.
The old mBox units had a hardware knob that you used to choose between the software sound and the hardware sound.

The AVID mBox series changed this to using software to route the two types of signal as well as the built in effects.
The Software Returns are actually the computer signals being fed back to the interface, so it's the output of any application using the hardware.

If you want to do the loop back you can't have both the Hardware Inputs and Software Returns up.

You just have to decide if you want to hear the signal as it enters the interface (= Hardware Inputs) or as it is sent from the computer (= Software Returns) then turn down the faders you don't wish to hear.