I cannot state anything definitely about your case, because support for APM has been dropped in 3.3-rc1
How do you flashed it with 3.3?
No, AltHold mode doesn't mean altitude will be locked for any position of throttle stick. It just make drone hovering at some locked altitude for some range of throttle stick position about its middle one. And drone will go down/up as soon as you will move throttle stick up/down.
Failsafe feature is related to receiver, not transmitter.