Indeed, the H2 should only be used with everything flat/off/disabled. Set the level to M 100 for anything that's not seriously loud, or L 100 if it's loud. Not much to be gained by using the H setting. Analog noise levels though remarkably low from the built in mics given the price do not appear to justify recording in 24 bits. Think of it as a "point and shoot" device and do rest in your DAW program afterwards.
For an example of what it's capable of when used in a studio and tweaked afterwards, see the one-minute sample at
http://www.fileden.com/files/2007/9/22/1451533/One%20minute%20skin.mp3