Look... Please forgive me if this message comes off a bit terse but I really am concerned that a lot of misinformation is being spread and that will lead to nothing being truly solved. The fact that turning off stereo recording seems to avoid the issue being experienced is somewhat incidental and could change at any time.
The components are designed to specification that has a range of tolerance. The software developed that affects more sensitive components like a microphone is designed to work with and within those tolerances. There is no reason at all that one should count on the turning off stereo recording factor would remain a solution because they could choose to again change how the gain functions in that format as well.
I am not certain of the reasoning behind having it set to on for stereo and off for mono, but I suspect that it has to do with managing gain from an array of microphones and so they made some compromises in software to ensure you would;t start on the opposite end of the spectrum (with audio that was so loud it would crackle and clip when played back and then gets quieter as the gain is properly adjusted).
Please know I've been working with professional audio equipment for 30 years. I've also spent 20 years in multiple areas of the consumer electronics, enterprise technology, mobile wireless, application development and so on and so on. And yeah, I've worked with Apple (but never for them) and even helped them solve a few engineering matters related to enterprise app distribution. That being said, I am a customer just like the rest of you, even if I have a bit more knowledge in some areas. I really want everyone to get the best advice and ideally for their issues to be resolved.
Ensuring we have a proper accounting of what is going on will more likely lead to Apple recognizing the issue and taking more proactive steps to ensure it does not happen. And also, if you ever hope for a software fix for this, then Apple must be able to reproduce the scenario which they would be unable to in a lab since that equipment is generally well kept and always in a clean environment.
For the vast majority doing the cleaning likely to be unsuccessful without using a solvent. And that solvent if used improperly will damage other components.
I used alcohol... and that was after carefully bathing and washing the phone with soap and warm water. I used a few different soaps and I won't go into which ones and why because I am not trying to teach chemistry here.
The initial problem of audio recording went away after the 3rd or force alcohol treatment. This had an unfortunate but thankfully temporary effect of dislodging the residue hanging to the grill of the speaker/mic and falling into the compartment instead of out of the phone. So when you would have any significant (above 50 percent on phone calls) audio playing through that speaker it would make a loud buzzing noise (like a blown tweeter would.). At first I thought the phone was damaged so I went through the trouble of having an express replacement issued.
While I figured Id be waiting a day or two for it to arrive I said what the heck. Let me try a bit more (cleaning) with a few other tools and a bit more solvent, soap and water. And once the water drained out and the compartment was dry.... it worked for both recording and playback perfectly.
The reason many of you are not seeing success with washing the phone or wiping it or even using a few passes of alcohol is because the grill has very small perforations and so material that becomes embedded there is especially difficult to clean. Water can't get inside so easily and neither can a solvent. So it takes several passes and heat to provide space to facilitate the cleaning.
In the end I don't think it's worth most peoples time. They should either have the phone properly serviced or buy a new one or deal with it.
You can live without stereo recording if that suits your fancy, but let's not pawn that off as a solution and certainly not insinuate this is a software problem, it is an anomaly that is a result of a software design decision, the problem is the fact the speaker/microphone grill is designed in such a way that it even can get residue embedded to such a degree that it causes this behavior.
If anyone finds more information on this and I am ultimately proved wrong, that is totally fine and I will be the first who is eager to learn what the actual cause of this was.
Anyway, thanks to everyone who contributed to this conversation, you kept me motivated enough to find a fix for my now defunct phone that must go back to Apple. :).