Hi:
So, it makes that noise as soon as you pick up the phone, on the dial tone, even before keying in any digits?
If so, and if it is doing that with two different phones, then yah, it's probably failed hardware. Did you adjust the transmit or receive volume levels on the OBi? If you did, then it's possible you set it too high, and it's causing feedback in your phones.
The first thing to try would be a restore to factory defaults. The easiest way to do this is to pick up the phone and key in ***8, then 1 to confirm. If it still squeals after that, it's defective. If you have another power adapter with the same specs as the one that came with the OBi, you could swap it out to see if that's the culprit. Many home networking devices (routers, switches) use power adapters with the same specs. Otherwise, it's time for a visit by the Acme Anvil Company.