Hi Rick,
Tonight I brought out my IC-705 to see if I could duplicate this on my 2019 MacBook Pro running Ventura. (Granted, this is newer than what you're trying to use, but if there is in fact a FreeDV bug it shouldn't matter what version of macOS is running.) I compiled the latest source code for the upcoming 1.9.2 release and executed FreeDV with the -f command line argument in Terminal to guarantee a fresh configuration, i.e.
$ src/FreeDV.app/Contents/MacOS/FreeDV -f ~/Downloads/freedv.conf
I then used Easy Setup to set up FreeDV as per the first attached screenshot. When I pushed Start, I heard no audio through the speakers built into my laptop unless I unchecked the checkbox under the Squelch slider. Once I did that, I heard the noise currently on 20 meters (which occasionally gets pretty high depending on what my neighbors are doing). Unfortunately as it's fairly late in the evening here, I can't currently test with live DV signals to ensure I'm not hearing the analog along with the decoded speech.
Note that the Squelch checkbox should have the following behavior regardless of operating system:
* Squelch checkbox checked -> no audio *unless* it's able to decode something (even if it's just an intermittent "bloop" type sound triggered by band noise), then the decoded DV signal is played (with no other audio).
* Squelch checkbox unchecked -> analog audio is played unless it's able to decode something, then the decoded DV signal is played.
which makes me think there might be something up on the Windows side if unchecking the squelch produces no audio for you. (FWIW, I get the expected behavior in my Windows 10 VM with the IC-705 USB devices attached to it. Other Windows users who happen to read this, let me know if the squelch behavior you're seeing differs from the expected behavior above.)
Anyway, I've also attached screenshots from Apple's Audio MIDI Setup application as well as various other FreeDV configuration windows in case that may be of help. Something that may also be of help is if you can record what you're hearing using the Record button on the left hand side and send the resulting .wav files over; while that will record the audio directly from the radio before it goes through any processing, if there is a FreeDV bug I should be able to duplicate it on my end by playing those files back through.
Thanks,
-Mooneer K6AQ