Adding my 2 cents to this thread. I was having the exact same problem, and this has been driving me crazy for days. Thank you @Phil Wearden for confirming the issue with your detailed uninstall/reinstall tests.My microphone also stopped working right after my KB5064401 and KB5065426 updates on September 10th.
I want to confirm what @Ashok S discovered, because it seems like it's the key to the whole problem: the faint audio people are hearing is coming directly from my phone's built-in microphone, not my PC headset. It seems like the update completely broke the connection to the PC's mic, and the app is just falling back to the phone.
When a Phone Link call is active, the app does not appear in the Windows Volume Mixer (Settings > System > Sound > Volume mixer). Other apps like Zoom or Spotify show up there just fine, but Phone Link is completely missing. This seems to prove it's not connecting to the Windows audio system correctly at all.
This bug has been a huge headache. I was so convinced my hardware was failing that I was ready to spent over $1000 on a new phone to fix it!
I can also confirm that the only thing that fixes this is to uninstall the KB5065426 update. As soon as I did that and restarted, my headset microphone started working again in Phone Link.
Hoping Microsoft sees this and issues a fix soon. For anyone else finding this thread, the problem is definitely the Windows Update. Your hardware is probably fine. Uninstalling the update and pausing future updates is the only workaround for now.