Well can not answer about the validity of a "authorised" Mac tech.....
However if to tune a station broadcast at 102.5, their FCC assigned broadcast frequency, at 103.5 something is wrong with the alighnment. When I have worked on tuners in the past the only acceptable deviation was.......zero.......none, nada.
The muting circuit is a threshold, if the signal is above the threshold you get the station if below it is silenced. This is to reject the noise when tuning through the noisy "dead" air spaces. It is therefore understandable why engaging it will eliminate stations.
The threshold is adjusted during a alighnment.
The mono switch just combines the L and R audio signals within the tape loop path so you are just listening to the combined signal.
You obviously need a FM antenna attached, the AM antenna was attached at the factory and unfortunately has sometimes been mistaken for a handle. If it got yanked off sometime over the last 40 years it would explain your AM issues.