So after studying my Milestone 2 a lot (flashing it thousand times, bricking, unbricking, disassemblying and assemblying with some strange parts of other phones  ) I have an idea about your phone.
There are two micriphones in Milestone (both - 1 and 2, Droid as well). One in the lower part (the one which you use when you are talking to somebody in phone mode) and second in the upper part (in the middle, right to the camera lens). First is used in normal phone mode, speaker mode and camera.
Second only (not sure) in speaker and camera mode. When you turn phone to speaker mode, upper mic becomes the main one, and the lower one is just catching the background noise (still not sure maybe the lower one is the main, and the upper one i canceling the background noise, but it's unlikely - will figure it out, when they will ship me a new lower mic  ). The same issue is with camera mode. Both microphones are working, but (now for sure) upper one is the main one.
So.... maybe you have broken upper microphone?
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