Finally I have someone who is encountering same problem like......

I am having this problem since I bought N900. To fix the issue I have flashed my N900 at least three times. I tried with vanilla firmware as well as the core OS firmwares. Nothing could solve the problem for me.

1st I thought it was hardware problem??? But in NITDRIOD it works fine... although in that OS cant get any sound but phone features works!!!

Can anybody help us...........

For charlesnadar:: I found a weird work around means, fixing this unwanted message without giving the restart. But every time your phone have detected call waiting / call on hold you have to do following things.

For this you need to have another sim / phone line.
1. From the new sim / phone line forward all calls to the N900 number.
2. Call the new sim / phone number from N900
3. First you will see the call waiting message / call on hold message
4. Then you will see busy sign.

Now if you make a fresh call which number is not busy then you will not see the call waiting message. But you see call waiting message then its actually call waiting, you need to follow the instruction and reset the message status again......