Oh yeah I'd suggest you put the servo links back into the outer center holes of the servo arms. You will need the responsiveness this gives, and there are other ways to "gentle" the heli. The first one to try is to add flybar weights. But first make sure it is set up right and that the servos are working properly. You are using the stock transmitter? Since you are an experienced RCer I thought you might be trying to use another TX...


Oh yeah #2
the blade rocking while you hold it--this is probably the feathering spindle rocking in the dampers where it goes thru the orings in the main hub. It's normal as long as it's normal--I mean there should be a certain amount of this rocking. On mine, when the blades are lined up fore-and-aft along the boom, I can rock them at least an inch up and down at the tips before the main mast starts to flex. This is normal.
The flybar rocking--all this stuff in the head must be almost ridiculously free to move. It took me a long time to understand how it could possibly work with everything flapping around like that. I still don't fully get it. Without seeing a video I couldn't tell you if what you are describing is normal. The flybar rocks everywhichaway, and if it is binding anywhere the thing won't work.
The flybar paddles must be exactly balanced and parallel to each other and to the flybar control frame so that they track evenly, or the heli will shake and wobble.