That seems like a pretty good guess, intuitively. Imagine what the amplifier IC would do if its "Mute" line was jiggled at 50Hz...
I would carefully check every component along the 'mute_ac' path. Shorted diodes, dried capacitors, that kind of thing.
Now that has made me think1 Yes if this part of the circuit was faulty then the mute could be turning on and off very fast, and AC will probably get amplified by the poweramp and make the horrible sound I am hearing.
I think the purpose of the circuit at the top of the previous schematic is to delay the turn on of the op amps and the power amp for protection.
Now, bear with me, thinking out loud here.
If you look at the attached analogue schematic you can see the MUTE line is being used to turn on a bunch of NPN transistors (shown in green) which short the OP amp ICs to ground. This would mute the output from those op amps.
Then there is the P_MUTE (shown in blue). This is connecting to the mute pin of the LM3886 Power Amp IC.
According to the datasheet:
Pin 8 Open or at 0V, Mute: On
Current out of Pin 8 > 0.5 mA, Mute: Off
So I think that to bring this IC to mute it is being switched by the power supply to -12V, therefore current will flow out of pin8 and turn 'on' the IC.
So the purpose of the circuit at the top of the previous schematic I think is to delay the turn on of the op amps and the power amp for protection.