So - here's what happens:-
Key in 136.975 - and you'll get AM transmission without hassles.
Click up one stop, to 137.000 - and the software in the radio changes to modulation to NFM (which, as someone mentioned earlier, causes a different wire to be energized in the output stage, which causes the modulation to not be AM anymore).
The way I see it - there's 2 different ways to transmit on AM air-band:
A) add a switch to "cut" the NFM stuff, and "re join" the AM stuff, eg - a hardware hack.
B) modify the firmware software so that it doesn't block AM in the first place.
If someone can get me a firmware dump of this baby, I reckon I could probably handle the (B) option (would also be helpful if someone who's opened one of this up can see what kind of microcontroller is being used, so I can skip figguring out the instruction set for it, and jump direct to the disassembly/hack stage