One more thing,
I don't know if this issue is related but when I'm monitoring microphone icon on the search bar, it flickers mos to the time it is just an outline (i.e. microphone is not listening) but it goes into filled 'grey' mode for very brief periods of time.
I also tried to use Voice Recorder app and then play back the recording - sound recording level is very very low.
I will try tonight to go back to final nightly CM 10.1 build and see if I have similar issues.