Mmm... it should kick in just fine if you have trimmed the helo so that when you
let go of the stick it doesn't go totally ape****.
Sideway movement seems to be the biggest issue that AH can't stand one bit,
so make sure if you are drifting, that it's either forwards or backwards before
engaging AH.
Also, when you engage AH, the altitude hold channel kicks in, so check if your
collective is too high/low, which might cause some silly behaviour.
Last thing to check is whether the Flight Director channel is enabled,
it should be off for AH.