Yes, indeed it does. The up/dn button should be depressed continuously whilst in ALT mode. The altitude should then change by +/- 500 ft/min. When the button is released the autopilot then maintains the new altitude. That's what it does in my (real) TB20 and indeed what it says in the JF documentation.
So I've tested it again, this time with the latest JF TB20 ver 1.8 running on XP 11.50. Sadly (frustratingly?) it still performs as originally posted, that is, "...on DN I'm getting a rate decrease of 1000 fpm whilst on UP I'm getting a dizzying 2000 (or more) fpm increase."
By the way, the fix (in ver 1.8) to the AP ENG button operation to be independent of the AP master switch works well. This now allows the autopilot to fly at a set pitch for climb and descent and ALT and NAV modes now appear to operate independent of one another which is also correct. Previously, all the autopilot did was operate in both modes whether one of either or both were selected. So although the AP in X-Plane is now more useable it's still not as good as the implementation in FSX (which I moved away from a couple of years ago), for example the TEST button and this particular issue.
Also, the small side window operation is now fixed in the latest version which was broken in the previous (couldn't open it).
Why the AP operation should be so different from FSX I can't understand. I brought this to JF's attention at the time the X-Plane version came out but nothing came of it. Unfortunately there's not an archive of old support tickets in my support account which would have been useful. Maybe the way to draw attention to such bugs is via this forum, but will anything come of it? Let's wait and see.
I think they are both superb renditions, but TBH, I prefer the X-Plane version, not least because the FSX/P3D one has a glitch in the GPS/HSI interface. A ticket has been raised.
I use it a lot for IFR practice and have the Reality RXP GNS430W installed on both. In the FSX/P3D version, in GPS/RNAV mode, the beam bar in the HSI lacks any sensitivity, so it's a bit difficult to do a precision RNAV/LPV approach! It's fine in VOR/LOC ILS mode.
I made a work-around by fitting the default FSX (Baron) HSI in place of the Stormscope, but it meant I had to do all my flying from the RH seat!
The X-Plane version works perfectly, however, and is a pleasure to fly.