Thanks for the guidance. As described, all is are correctly connected and the monitor speakers/mic work correctly when playback device is set either to "monitor" or "Echo Cancelling Speaker phone". Microphone can be set only to "Echo Cancelling speaker phone" since there is no "Monitor" option available.
I can hear/record sound only over the monitor - i.e. speaker and monitor-mic - . Not over the headphone jack. Similarly, it does not swich over to the headphone jack when I insert a plug.
(Btw all my headphones work well and are tested on other devices as well)