RE: How does it all work
In general, you will find that the heli is unstable. Those things are a handful to keep in check. it won't go hands free for you, and for someone with many hours of hovering practice, they are lucky to get it to hover hands free for 3-5 seconds.
You are on teh right path, though.
make sure the flybar paddles are perfectly straight and tight. also make sure they are centered correctly.