What would be a proper stick setup for this. I've found that with it off, anything I fly falls out of the sky like a brick and I have a hard time believing anyone can fly with the damn thing off in any event. I also don't see a lot of folks falling out of the sky whilst fighting them so I wonder how many people actually fly with it off.
The proper stick setup depends on the stick you have, and how you wield it. If you're a bit "ham-fisted" and tend to slam the stick all around, you really should try to be more gentle and make smaller, more smooth movements - you'll be amazed at how well you fly after you retrain yourself. You can also go into the controller setup in AH2 and play with the scaling and/or dampening of the joystick axes.
Proper calibration in Windows and AH2 is critical, smooth movements while in flight is equally so. Even if you are able to adjust the stick settings to make up for being "ham-fisted", you should really get into the habit of being smooth. Adjusting the game to make up for being heavy-handed on the stick really cripples your ability to maneuver.
The use of rudders also helps with turning, but it sounds like your problem is over-controlling the stick.
The first thing I did when I fired up AH2 is turn off the stall limiter. I stalled all the time, but it didn't take long to settle down and now I can ride the edge until I either get out-flown (happens more than I'd like), or I get stupid and pull just that little extra bit to try to force a shot I should pass on, instead of working towards a better one.