From netcomsv!decwrl!elroy.jpl.nasa.gov!sdd.hp.com!nigel.msen.com!yale.edu!yale!gumby!destroyer!news1.oakland.edu!vela.acs.oakland.edu!prvalko Wed Oct 13 10:22:12 PDT 1993
Article: 48599 of rec.radio.amateur.misc
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From: prvalko@vela.acs.oakland.edu (prvalko)
Newsgroups: rec.radio.amateur.misc
Subject: Re: Yaesu FT530 AM receive
Date: 13 Oct 1993 11:45:44 GMT
Organization: Oakland University, Rochester, Michigan, U.S.A.
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You can store the "MODE" in memory.  
Setting the unit to AM can be done on either VFO.
Setting the unit to AM will preclude you from receiving 2M FM.

As for how it's done... from what I heard (I never bothered to check)
they run the signal through the S-Meter diode to demodulate AM.

73 paul wb8zjl