Comment 47 for bug 409819

I have the exact same hardware (Thinkpad X300, running the cat, lspci, and arecord commands from the bug description gives me the same output) and the exact same issue.
In my own words:
- When "Internal" is selected as the recording source in alsamixer, the "Mute" checkbox in Sound Preferences atomatically sets itself.
- When disabling the "Mute" checkbox, the recording source in alsamixer changes back to "Mic" automatically.
It is kind of a catch 22. I can't set the internal mic as the source without muting it at the same time.

Note that in alsamixer "Mic" = external microphone plug, "Internal" = the built-in microphone for my system (this way it worked fine under jaunty).