Mute while on a call becomes undone by incoming second call :
Here's what I am able to replicate (on ios4 running on iPhone 3G, jailbroken and unlocked but on AT&T network):
1) On a call (call it "Call A"), click mute
2) Click power button to turn off screen
3) Incoming call (Call "B") happens while you are on Call A
4) Don't answer Call B - just let it go to VM or the caller hangs up before VM
5) Swipe to unlock while still on Call A - notice you are no longer on MUTE
Here's what I am able to replicate (on ios4 running on iPhone 3G, jailbroken and unlocked but on AT&T network):
1) On a call (call it "Call A"), click mute
2) Click power button to turn off screen
3) Incoming call (Call "B") happens while you are on Call A
4) Don't answer Call B - just let it go to VM or the caller hangs up before VM
5) Swipe to unlock while still on Call A - notice you are no longer on MUTE