I got my replacement today and it works! The reason I returned it is because it had a bad circuit board or motor and was doing a thermal shutdown. Woot! even cross shipped. How cool are they?!?!
Anyway, I have a Droid X and a blue helicopter. Using the app i-Flight, it actually works in ALL A, B, & C channels, which is how it should be. Think 27MHz vs 49MHz in the radio control toy arena, although the helicopter itself is a little smarter about the channel that it's going to use.
Here is how it works. Instead of being strapped to just one channel like radio control vehicles, after the helicopter is turned on, it locks on to the first one of those channels that it sees transmitting. This is so that 3 people can fly 3 helicopters at a time; one on each channel. After the first helicopter is turned on and locked on, say on channel A, any subsequent helicopters being turned on should be done so away from the range of the first one's transmitter(s) so that it can be locked onto the "new" channel; B and then C. And of course this means that once a helicopter is locked onto a channel, you cannot change the channel on the transmitter without losing control of the helicopter. You'll need to turn the helicopter off and back on to get it to work on the new channel.
Hope this helps! I'm off to buzz my dog, who is strangely attracted to it, but then moves away if it gets too close. lol