I was thrilled to find this out! I plugged in my AUX cable to listen to my podcasts on DoubleTwist and I decided to try out the Genius button to call someone thinking it would not work. Well, it seems that the phones microphone stays on when the AUX is plugged in and it does not detect a built in microphone. The call came clear through my cars speakers and the person I called could hear me very well with it attached to my dash.
So, those of you like me that are too cheap to buy a hands-free set up with your car stereo...well...now you have one! The G1 couldn't do this but I don't know about other android phones.