Fixed it! Thanks to a little 3 second "Oh yeah, almost forgot this.." snippet from a Youtube ZVM Assembly video and looking closely at the frame I found the little piece of molded rubber fits over the microphone! Apparently whoever took the ZVM apart (battery replacement?) didn't do a very good job putting it back together, all the screws were loose and the rubber microphone cover had wedged itself up by the slider switch causing the problems described above.
So, it's all back together and works great! Nice having a Zen again!!