I suspect there is a mis-match between your radio and the phone system - the schematic is OK. First off, you might want to replace the switch with a DPDT type and switch both the hot and ground rather than just the hot lead - you have two different grounds (phone and radio - not necessarily the same potential. Secondly, if you still have a mis-match, you could try to isolate the radio output by putting a capacitor (0.01/0.05 - whatever you have handy) in the hot line to isolate DC.