MSFF2 has an sensor which activates FF when you hold the stick. It is located just forward, below the trigger. Make sure that nothing is blocking it.
Usually when the light switches on the joystick it happens when it isn't plugged in the socket. Double check the power cable as well.
If the above fails, then there is something wrong internally.
PS: Loosing FF on alt-tab is a known 'bug' with MSFF2. There is nothing you can do about it except hitting re-fly when online / starting a new mission - this will reactivate the FF. Or just don't alt-tab out of the game.
