Why does my MacBook audio output have no sound when connected to a stereo component?
You seem to have isolated the issue to the stereo component. If it expects line in signal, you might need a device like the Griffin iMic to provide line level sound.

Also, setting the volume lower might make the input low enough to not trip a protection on the stereo, but usually line level is higher than speaker/headphone level so that might not help at all.