Finally got around to checking this out. The issue is gimbal.  Any craft with a large gimbal seems to get into an escalating over-correction cycle.  For some reason, gimbal doesn't seem to have been as cleverly adjusted as other SAS controls for 1.2. I'll be dropping the gimbal on the next release.  I've been working on emissives for the engine heat as well, so there is an update coming.
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