I've always been puzzled why in all my Nokia phones from N93 onwards, why Nokia cannot replicate the audio recording that is saved into video with the standalone audio recording app.

Here's some samples from the N900 handling a very loud live band - Platform Six :

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unlike most other non-Nseries phones, the audio is relatively clear and not muffled.

Here's a different sample set of some buskers, not so loud.

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The main reason I want voice recorder app quality to match audio from video is that I use my phone to record lectures. As big as memory is on the N900, it's going to be pretty quick to munch up 900,000MB of 50 minute lectures.

Is there any limitation, creating voice recorder app wise, to using the full potential of the N900's microphone?

Have you try the Recorder app version 0.3.2 in extras-testing?

Yeah, I think so. Is it the app that's just a red dot?

I don't know if it's just in my head but the sound recording still sounded better (from my tests anyway) using audio from the video than the recorder app (though this recorder is much better than those for S60V5 - much better quality)

There is another app called LoadApplet
There's a recording function on it, right now it seems to be recording from the camera not the screen as it's intended to.

You might want to give that a try..

Looking at the service manual for the N900 it seems the audio recording is AAC