I got my pre-ordered Nexus 7 16GB (from Staples) on 7/16 and everything worked fine until today. I just tried using Google Now and it is not picking my voice. So I went to Evernote to record Voice memo and it is not picking up anything either. I did Factory reset and not solving my mic issue. I think the mic in my Nexus 7 died? Anyone else got mic issue?
Its not the toggle on/off but I have fixed mine with a rather strange fix.
Put your lips over the mic hole and gently suck for a second or two, this fixed mine. If you tap the back panel you will see it is working slightly(on Google now) but after doing the suck trick fixed the issue. Hope it works for you.