OK, so I put in nav1 the ILS freq of the runway. Then autopilot on and the approach button ON, right?
Now I just keep the aircrafts nose up and flair it when it goes in to land? I tried it with a 747 but the aircraft didn't want to go down in altitude (I made sure the AP altitude hold button was off) at all...
what am I doing wrong?
Big Al,
Bad news. I have had exactly this same difficulty, and it matters not what airport or equipment you are using. The ILS in FS2002 is BROKEN :'(.
I have landed very successfully many times using the ILS in FS2000. But the autopilot is malfunctional in FS2002. I know this because a Microsoft games support guy told me so recently. And they have absolutely no plans to publish a patch for this terrible, glaring problem.

In FS2002 I can snag the heading of the ILS. But vertical speed never kicks in, the AP Alt button indicator light never goes off to indicate the altitude lock has been successful. My aircraft simply stays at the same altitude and merrily flys 2000 feet over the runway as though there were no ILS altitude control at all. Oh, well. At least I'm going in the right direction!
Another problem that was programmed into FS2002 is that some of the airport runway elevations are incorrect. Thus when you try to land on some of them, your tires dig deep into the runway and drag down your aircraft. Yet other runways are located underwater. I found one of these in Alaska. The strip was at the bottom of a lake!

Again, since Microsoft developers are too busy messing up new versions of the sim, there will be no patch for this problem, either.
FS2004, anyone? ;)