I am unable to hear any audio when I record video - is there a setting I need to use so that the mic turns on?
Beats me. I just tried a video recording for the first time with my Droid, recordered both audio and video, no problems.
One thing I did notice... my "media volume" was set way low and I could barely hear the audio. After turning it up to 3/4 of max, audio is fine.
I'm not aware of any settings to disable audio during video recording.