There is NO problem when I'm on a call using bluetooth in the car. There is no problem when I use any voice recording/google now/swype voice recognition type app. Video recordings also work fine.
I'm using the latest OmniROM with Franco.Kernel. I can confirm that the problem also persists when I use the OmniROM kernel.
Could this be a software issue? I'm concerned because my screen has a crack in it and I'm not sure if Google/LG will cover a microphone issue under warranty because of the cracked screen. (I can also confirm that this problem existed BEFORE the phone fell causing the cracked screen).