Steve,

The CORTEX (or any gyro) won't correct a crab when in rate mode. Rate mode only dampens disturbances so providing the model is crabbing 'smoothly' there are no disturbances to damp down. It doesn't affect drift (i.e. crab) just roll, pitch and yaw.

You may be able to get the response you want in hold mode but, as you say, most people don't use hold mode other than for hovering when 3D flying.