The tone controls are passive, cut only regardless of the state of the preamp switch - I find it odd that the behaviour changes with the switch.
The only similar issue I've had was with a bust bass pot on my El Toro. 100% bass was fine but as soon as you turned it down below 90%, all the bass disappeared. Replaced the pot, problem unsurprisingly went away.
Is this a genuine volume drop (you still have plenty low end in the sound, just quiet), or a removal of bass making it sound weedy and thin?