So far I have found four people with this identical problem. They all purchased an iPhone outside the USA (where in some cases laws have prevented Apple from locking the iPhone) and use it with either a pre-paid 3rd party provider or with an existing non-iphone contract AT&T sim card. The issue they have is that on normal calls the microphone doesn’t seem to work, but on speakerphone calls it works just fine. Basically on a normal call no one can hear them but if they switch to speakerphone it works fine.I even took an iPhone to the apple store with my existing AT&T sim card to demonstrate the problem and a technician there confirmed that even with the thousands of iPhone returns, he had never seen this issue before. So a week ago when the 3.0 software finally became available I updated the phone with it and voila! now the microphone works with or without speakerphone turned on.
I knew it was a software problem!
With jailbreaks available for 3.0, now even those without AT&T contracts can easily resolve this issue by simply upgrading to the latest and greatest from Apple and enjoy all their calls with semi-privacy again.