Level bombing works if you have automatic bombsights like the He111 does. Check my sticky FAQ thread on the main page for a long-winded explanation
What doesn't work is manual bomb release via joystick/keyboard buttons if you are not sitting in the pilot's seat. You can still click on the switch in the bombardier's cockpit though and the bombs will drop, or switch back to the pilot's seat and press your stick button.
I prefer the first method, simply zoom out a bit with the FOV keys just before it's time to drop and click on the switch.