Cheers, thanks for testing this out. So it is in fact tied to a realism switch and the wobbling is intentional behavior, probably simulating the limitations of the gyro-stabilization system. Interesting.
With realistic bombing turned off maybe level stab works too, at least in the bombers that lack a course autopilot (BR.20 and Blenheim).
Another thing about the course autopilot, you can actually fly the aircraft at the same time that the autopilot is engaged. Maybe that is the trick to getting rid of the the 5-7 degree offset.
I've read the manual for A2A's add-on B-17 for FSX (i think it's freely available on their website, i got a peek on a friend's PC who's an avid FSX flyer) where they modeled the wartime autopilot and it's not a trivial thing to set up, requiring trimming for level flight before it's engaged and then some further fine-tuning to ensure it's accurate.
Maybe something similar is needed for the Luftwaffe course autopilot and we're meant to correct the offset by manual control inputs.
I would test this myself but it's Friday night and i'll probably end up going out for some drinks
