Well, I answered my own question. Not sure if that makes me a genius or dummy.
I was looking for an answer to why the gimbal only looks up or down and was not finding anything. Out on Helifreak.com I found the answer. I saw this when I first got my P2 + Zen a few weeks ago, but since I was not installing the gimbal right away I did not to the entire firmware update.
Firmware
Optimized user experience when using the PHANTOM 2 remote controller for Zenmuse H3-2D pitch control.
Important notes for PHANTOM 2 users:
For users of the PHANTOM 2 with Zenmuse H3-2D, one must adhere to following steps to upgrade the remote controller firmware.
1)Use the PHANTOM RC Assistant software to upgrade the remote controller firmware to V1.0.1.11.
2)Calibrate the sticks and X1 channel of the remote controller using the PHANTOM RC Assistant software.
3)Use the PHANTOM 2 Assistant software to upgrade the Gimbal IMU firmware to V1.8 via Upgrade page.
4)After the upgrade is completed, calibrate the X1 channel of the main controller using the PHANTOM 2 Assistant software to ensure compatibility of PHANTOM 2 and the Zenmuse H3-2D.
Please click here for more information.
Turns out you have to calibrate your transmitter using the Phantom RC assistant on the transmitter (separate program from the Phantom Assistant you use to update the quad's firmware. Once I went through this procedure a few minutes ago, the gimbal control lever on the back of my transmitter (X1) now allows me to tilt my gimbal camera throughout smoothly thorough the entire gimbal range.
By the way, if you do not have the RC assistant installed on your computer here are a few tips.
Windows: Install the Windows Driver (either the regular windows driver or the Win 8 driver on the support page) first.
http://www.dji.com/download/phantom-2-downloads/
Then install the the RC Assistant, connect the Transmitter and do the calibration. You can then run the Phantom Assistant program and calibrate the sticks and gimbal lever. My gimbal worked correctly right after I did this.
By the way, if you have a Mac like I do, there is no RC Assistant to update and calibrate your Transmitter ported to Mac. You have to find a windows computer (or run windows on Parallels/VM Ware whatever).
Hope this helps.