I do board level repair on business phones. I'm encountering a handsfree problem with the Aastra 5316 that I'm not able to solve. I open the line and the volume is very loud, the display shows that the phone is responding to the volume keys being pressed, but there is no actual change in the volume, and the mute key is the same way(the LCD flashes, but the mic is not muted. I've compare against a phone that works properly with a oscilloscope and wasn't able to find anything. Any suggestions?

I am not familiar with that model of phone. I would have first suspected a short on the keypad somewhere causing the phone to not recognize that you are pressing the volume adjustment, but if the LCD is showing that those button presses are being recognized, you have me a bit stumped.
The next possible issue would be in an I/C chip, which you should be able to compare with a good phone using your oscilloscope.
I will think about this some more...