people (many) who lower rf gain to make their radio quieter do so wrongly in the same sense as throwing the baby out with the bath water. that's incorrect use. except for special situations such as trying to talk with closeby stations, while there's undue outside interference or other nearby radios bleeding over from other channels, you should otherwise always keep rf gain all the way up, especially so, since on the avg rf gain control, an approx 1/4-1/2 redux of the knob will result in approx 80-90% attenuation of incoming signal...baby out w/bathwater!
truckers seem to be born with the tendancy to do this (above). i have a demo that cures them of this: i show them a strong 9s units or above signal coming in from truckstop around the corner, then i lower rf gain usually only 1/4-1/3 back..and the signal & most of the audio often disappears.
squelch is like drawing a line in the sand..muting the audio portion of any incoming signal below the line & allowing it, if above that line...the proper & 100% effective way to stop noise of low to moderate signal stregnth, however the signal stregnth of background noise is an ever-changing level thing, therefore an effective squelch circuit (as i understand it) cannot have that "line-in-the-sand" setting be a "razor sharp thing", because if it was, you'd have to raise your squelch "threshold" higher than necessary, in order to "smoothe out those bumps", but here again, doing so is "throwing the baby out w/the bathwater, because you may be missing the audio of some "borderline" signals. hence, the squelch circuit must incorporate something called "hystersis" (i think that's the name). hystersis means different things in different sciences, but in a squelch circuit, i believe it is akin to "the width" or "thickness" of that line in the sand, threshhold, i.e., i think it's kind of a "buffer zone", rather than the "razor line". that's my understanding. i hope it's correct. so in this way, you can set your properly working squelch & it kind of has a built-in automatic buffer to deal with the normal "bumps" in the signal stregnth of the avg, everyday background white noise, so that it needs only minimal adjustment & has minimal "chopping in & out". i learned about this due to the problem many of the early cobra 150/200gtl dx's had with this, causing people to not be able to adjust their squelch, in the normal way, and causing constant "choppy" noise...in/out..in/out, such as what i believe you were describing experiencing. cobra put out an early service bulletin on correcting this & it works very well! if you (or whoever...i realize this is 3 yrs later) have 1 of those radios, there's your likely fix..and if in a different radio (i never found the same issue in other radios) then looking into above may be the answer. w/o it, when you have this problem, you don't even want to use your squelch control.