I am having the same issue.  When in manual mode, the pitch knob doesn't seem to do anything.  I can turn the elevator axis hold off, then use trim controls to get it where I want it, then click the elevator axis back on and it will hold that pitch fairly well, but trying to use that knob is useless.  

I am also using the 2d AP panel.  Running FSX SP2 under Vista 32 SP2.  Everything else seems to work fine.