I wanted to follow up on my issue with my AK240. I spoke with Jimmy at iriver in Irvine, CA, and we went over my difficulty with the external volume control. Jimmy suggested I do a factory reset which I did but to no avail. Jimmy then sent me an RMA form so I could ship my unit back for replacement. During this process, I found him to be helpful, understanding, and patient with all my questions.
Jimmy mentioned this was not the first time he's seen a problem with volume controls in that there had been similar cases with the AK100 and AK120. I was the first to bring to light this issue with a 240, so it is an anomaly, not an early production problem.
A big shout out to Ted at teds headfood for helping me through this situation. My only anguish is I will be without my highly addictive 240 for about a week and that I will have a couple weeks of burn-in to get back to the magical space the 240 puts one in.