giorgio nicola wrote on Jul 26^th, 2011 at 11:44am:

If you want to hold altitude (I think) you have to set it also on the Flight Director panel

No !
On those old birds (707/727)  the Flight Director is an independant system and has NO link with the autopilot.
You may and, i think,  should use it, but you are not obliged to use it.
It simply moves the pitch and roll command bars on the HFD, that's all!
This facilitates your manual flying but there is no link with the AP.
On today's birds the Autopilot follows the FD's commands.

BTW the real cause of my problems (altitude hold and Glideslope capture) was the fact that I had introduced a parameter
"elevator_trim_effectiveness=0.250" in the flight_tuning section of the aircraft.cfg of the 707, as I had found the trim oversensitive in the beginning !
When I did a repair install, as Mark had suggested, the problems disappeared!
I understood only afterwards (by making some tests)  that it was because the repair had reset this parameter to 1.0 again (default) !

Altitude hold and glideslope capture work perfectly (with or without FD) !   :)
And I can also live with the trim (as it is)  now.

Guy