Squelch-induced noise?

I've just noticed what may be a problem on my 6500 running 1.4.3. I've been using it on 70MHz FM, and for a while it's seemed to me that signals are too noisy for their received signal strength - ie the receiver isn't being quieted as much as I'd expect.

What I've just discovered is that the effect varies with the squelch threshold setting. If the squelch threshold is set below the point where it's always open, the receiver seems to behave pretty much as I'd expect. Once the squelch control is advanced past the point where it would mute the receiver if no signal is being received, the noise in the receiver increases as you raise the squelch threshold, even if a signal that you'd expect to fully quiet the receiver is present.

I haven't hauled out my signal generator to investigate further yet, but I wondered if anybody else has noticed, or can reproduce this effect (or tell me what I'm doing wrong)?