Regardless if I plug in a headset or headphones (without a microphone), I get a headset icon in my notification bar.
I would expect Android to use the builtin microphone in case normal headphones are connected, so I do not have to unplug my phones when someone calls.
Alternatively, is there an app or widget to manually toggle between headphone and headset mode?
I have an HTC Desire with CyanogenMod 7, so I am not sure if it is a problem with CM7 or Android in general.