OK, OK, technically this is the second flight.. First flight is here: http://youtu.be/0yKjbtFW-u4 ; I just like the second video better.
The vertical instability was caused by me not having the throttle curve set right on the Transmitter; by default it is just a straight line from 0 to 100. Setting the throttle curve to something more curvy makes it much more stable up and down.
Took me a while to get back to this, mostly because I was waiting for a replacement motor installed after a brief but terminal "magic smoke event".
Thought I also needed a new ESC, but found a post here (http://diydrones.com/profiles/blogs/one-esc-is-not-like-the-others) which set me straight.
Spent a bunch of time at the workbench running through things, including
Anyway, that's enough for now -- I'm off to fly some more...