Scott,
What your describing is exactly what my heating system is doing.
Really hot like 145 F when I put it on recirculation. And like 104 F
when I put it on defrost.
Also, anything above setting #2 blows cool air.
I also took a infra red temperature gun to the 2 hoses on the firewall and seen that there is a drastic drop on the return hose so the back flushing I did on the heater core has helped. Supply hose 180 F and the return hose is like 150 F. I'm not sure if my next task of replacing the blend door is going to solve the problem, but it sounds like it may be the problem as I get really hot air in the recirculation mode. From what I read so far on the blend door, it fails in the cold air position. Also heard if you remove the glove box, you can see the electrical plug in on top of the HVAC unit where the blend door is located..
Also to change the blend door actuator, you need to remove the dash board. Sounds like a summer project for me.