The IP SoftPhone product can operate in one of two modes. One mode is to remotely operate your existing hardware phone, which you've obviously become familiar with. The other mode is to become an independent phone and send/receive audio through your PC, which is where you're trying to go.
It sounds like you've gone through all the steps to use SoftPhone the way you want. You mention that you've "associated the CTI device"; this is worth double-checking because this one point where you could be breaking down. Your username that you've configured into the Cisco TSP should have control over the CTI port you intend to use.
If that's in good shape, and it probably is, then there's a strong likelihood you're selecting the wrong line to control when you start up SoftPhone. If you look at the URL below, you'll see how to access the Line Selection dialog. You ought to have at least two lines to pick from: at least one for your 7940 phone and one for your CTI port. You can tell them apart by the You need to make sure you see and pick the CTI port, because by whatever means you're selecting the 7940 phone to control right now. The URL below also describes how to tell the two apart if you're confused.
http://www.cisco.com/en/US/partner/products/sw/voicesw/ps1860/products_quick_start09186a00800a5a22.html#39534
