That's a Q switch. It works with the low-pass filter (tone control). In normally, the switch provides an 8dB boost at the cutoff frequency of the filter when in the down postion.
To test if yours is installed in this direction, hold a sustained note and rotate the filter control back and forth. Then do it again with the switch in the other position. Whichever one produces a wah-wah sound is when the Q is on.
If you hold a sustained note and flick the switch back and forth, you won't hear much difference as the Q affects mainly the attack of the note. A general rule of thumb - Q on for slap and rock, Q off for blues. But feel free to break this rule.
For the radio, I'm guessing you haven't been experiencing this for 15 years, or we surely would have heard from you before today. We've had s few reports about this and now believe the requirements for digital televsion broadcasters are driving the high powered FM stations way lower on the towers than they've ever been. Ron is researching how to resolve this, and we're confident he will since his background in engineering is with broadcast and radio, so he understands it quite well.
To help us fully understand your problem with radio, please test to see if it is equal in both pickups. Your help will be appreiciated, since he is currently working on this solution.