If you search around, you can also find some that are USB powered (so you won't need to keep buying batteries). An example is one at
this link for $8 (I've never ordered from dealextreme, so I can't vouch for them).
You would actually connect the minijack (aka headphone jack) on the FM transmitter to the stereo output on your sound card, not the line in.
EDIT: Oops. That link is for one that is powered by a car adapter. Hmmm. There's probably others that are USB powered, though. I found some that were $60-$150, but you'd be much better off just buying new speakers (like TLS Guy suggested) if you had that kind of cash.