I was hand flying at an assigned altitude of 5,100 (which was the MVA for the area) and decided to engage the AP to review an approach plate.   I was slightly above 5,100 at the time - probably 5,120 or 5,140.  5,100 was already dialed into the altitude field.  I hit the VS button to engage the altitude.  The button turned green, the VS field on the display went to -500, and the ALT button turned blue.  I turned my attention to the approach plate, and when I looked back I was at 4,950 and descending.  

On a more recent VFR flight I tried to repeat this scenario - at 14,500 feet but otherwise similar.  I found that most of the time the descent (or ascent if I was slightly below) stopped at 14,500 but about one time in 20 the AP would go right through the altitude.

Is my procedure correct here?  My understanding is that if I hit the ALT button, the AP will just hold my current altitude - even if its not quite what is dialed in, so I have been using either the IAS button or VS button to engage the AP to hold the set altitude.  Is this the right procedure?  Is there a better way to command the AP to hold the set altitude when you are slightly off from it?

Has anyone else seen this behavior?  

When you press VS, ALT will be armed (as you know).  But, there's a short delay after pressing VS to allow you to adjust the altitude target, if desired.  If that delay were not implemented, then if you decided to change altitudes, then pressed VS, the system would immediately capture the current target and go directly to ALT mode.

We suspect that you were just on the edge where the autopilot thought that you really did want to capture the same altitude, but you were close enough to escape the 10 foot capture band within that suppression time frame.

When you're pretty close to the target altitude, as in this scenario, our suggestion is to just press ALT to hold the current altitude rather than VS to close the minimal gap.