Okay... I only woke this one up to let you all know the final answer. The final act occurred today (Sat, April 4).
The original complaint of low modulation was really indeed the two factory resistors that were swapped in their locations. And yes... it cam from the factory that way. The solder had not been touched. In addition... one of the two swapped resistors was a 5.6k in the radio... BUT it is a 1K on the schematics. The way this is configured:
With the 5.6K and 33K swapped the mic signal coming in would be severely attenuated. Add to that.... the one that the schematic says should be 1k but is actually a 5.6K .... would kill the mic audio even MORE!!!!!!
Needless to say, I put the 33K back where the 33K should be and I put a 1K where the 5.6 K would have been.... NOW it matches the schematic!!!
The modulation did come up as high as about 63% (measured on a scope)...but any pushing of mic audio beyond a certain point caused a very ugly and spiky distortion in the audio waveform. Also the AMC adjust had surprisingly little effect on the audio level.
THAT was tracked down today. A bad C4 (220uF 16v) that was the main output cap out of the audio amp.
What is weird..... when I removed the old one I tested it on my component tester:
in ONE direction... it showed a 26 pF cap.
turn it around to the OTHER direction.... it showed a 47 uF cap.
This is weird behavior for an electrolytic cap... especially a 220 uF one!!!!
The new cap tested 227 uF in both directions so I felt good about that.
Put it in and the modulation envelope was beautiful!!!!
AND.... NOW the AMC control worked.
Set the AMC for about 97% and now I can yell into the mic and not clip or pinch.
So, at the end of the day, all is good!!!!!
XMT: about 3 watts carrier, fwd mod present (dont have a peak reading meter!)
RCV: I could hear the tone WELL down to -120 dBm and that is as low as my 2040 goes on the dial.
So..... ignore my original starting topic!!!!!
It is up and alive.