So I've found the problem with the FM Tuner on this phone. They have soldered the antenna to the microphone ring on the 1/8 inch jack instead of the L or R audio output ring. If you use a regular set of headphones, the antenna will be grounded to the phone, which is useless.
The only way to get reception is to use a headset (with microphone). This is definitely a defect of the hardware and won't be able to be fixed using software. Someone in the assembly line definitely messed this one up. Not sure if it affects all phones or not.
By the way, the reason some people are getting reception when pulling the headphones half way out is because you are making contact with the antenna to the R terminal on the headphones as you slide it out of the jack. Try it out once!
I contacted HTC with this information and we'll see how they respond. I'd say there will probably be another version of the hardware on this phone to fix this problem and the weak wi-fi signal.