it's hard to explain hovering as it's just a case of getting the knack of it.. I remember when I started on a picolo heli a few years back i struggled for a week.
few tips though
- your primary focus should be keep the tail pointing towards you, as soon as you start losing tail and you know you cant get it back land the heli or you will crash.. you should only move the tail away from you once you can hover a whole batt pack non stop no crashes.
- these little fixed pitch helis are slow to respond to the cyclic (right stick on your controller) when the rotor speed is low... this means when you only just off the ground at low level you end up moving stick all over the place 'long throw' to try and keep it in one place. your much better with these heli's (assuming you are familiar with sticks) to lift off a couple of feet off ground. Flying at this height means rotor speed is up and cyclic responce is much better meaning you only need tiny movements on right stick to keep heli in same position.
- the heli will pull to one side as you lift off, just get it in air past this stage while compensating for the direction it's trying to scoot off in
- if using training gear the heli can get into a 'rocky' motion as so much weight at bottom of heli... try not to let it start by making small movements with cyclic
- don't overcompensate for direction changes. often to stop a heli 'sliding' one direction you have to apply the opposite to stop it quickly.. if either you apply to much, or hold this opposite motion too long you over compensate and you end up with heli moving opposite direction and in same trouble. once your rotor speed is up and your a couple of feet up you should be able to make only tiny adjustments to keep it in hover, also at this height you get the heli out of ground effect that really upsets any heli
- if your getting close to a wall best to set it down rather than crash full speed into it

(or what I do loads on these, catch it)
edit: with the axle thing, cut it where I put the red dot below so it can spin freely...
edit again:
mechanically make sure the flybar paddles are both straight when heli is initialized (or slightly angled up if you prefer that feel never tried it though), and the distance from the base of each paddle to the rotor head the same on each side.. mine was out by about 1.5mm from factory, but not much.
make sure the whole rotor head pivots freely, if you flick it down at one side it should bounce up when it hits bottom showing it's nice and loose
when heli initialized the swashplate (the plate below the rotor head that tilts it) should be horizontal.. if it's not the heli will drift madly and be hard to trim
make sure the collar on axle about half way down has not slipped allowing up / down play in the axle, that would make your controls feel like jelly
if your heli is setup nice you should not have to mess with transmitter trims, i always seen these as a fix for a poorly balanced machine.. maybe wrong with this assumption, but I prefer a heli that doesn't need 'cheats' to stop it wandering about too much.