To sharpen my observation, the roll works fine with CWS, except for the odd behavior of returning to wings level, then back to whatever you have set the roll to.

It is the pitch that is the problem. It behaves much less nicely than the roll. If there were no problem, they would behave in similar fashion.

Sampling another's interpretation of the 737-200 CWS (ahem) there is a world of difference. Trust me on this one. But once Captain Sim gets their 737 finished, I'm sure there will be no comparison.