Just curious, but I've been trying to figure out if it was possible to use the autopilot to fly VOR to VOR?

of course, after you have engaged the Autopilot and selected the vor frequency that you are flying to. and on the heading indicator that has the course and heading needles on it, turn the course selector to the radial you want to track and your all set.

how do you set the radial on the 727?

Using the Course Selector knob on the HSI.

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Since I can't make my own thread (grrrrrrrrr).......

When tracking a radial towards a VOR, is it normal for the autopilot to veer the plane back and forth in a S pattern across the radial line? i.e. it never really seem to track perfectly straight.

No, not normal except when you're very close to the VOR. But I've had that happen to me as well.  Try turning off winds, and manually fly the heading toward the VOR - get her stable - then engage autopilot, see if that makes a difference

Sometime the 727 does seem to have trouble tracking the VOR radial, yet at other times it will behave perfectly fine (until it gets very close to the VOR).
I can't say if it's the wind affecting it or not (I never turn the wind off, and also use AS2012 real world weather a lot).
IMO, I find it strange that people would buy a product like the CS 727 and ONLY fly it in Clear Weather! :o

I've never actually tried it out of force of habit, as I've flown a few different types with the Collins FD-109 system (B727 being one) and the nav tracking mode wasn't very smooth. It would be constantly banking back and forth to the point that it got annoying, so we just tracked radials manually in heading mode.

Maybe the S turning is just built in realism, intentional or not... ;)