The autopilot on SV Watermelon was hydraulic and we had to bleed air out occasionally, so I asked Peter what he thought the problem and solution might be.
His response was that there are a lot of reasons why the system isn't bleeding properly, and therefore lots of things to try to bleed out the air.
It's possible that the stops for the rudder are less than the range of the hydraulic ram in the slave cylinder so that it stops before reaching the end of its range, leaving some air trapped. One possible solution is to disconnect the rudder from the system and turn the wheel to the end of the range of the ram several times to try to dislodge the air.
Another thing to try. Get someone to turn the wheel while you wield wrench at the cyclinder. When the wheel has turned until resistance, loosen the nut locking the hose to the cylinder so that some air and fluid will squeeze out - turn the wheel further then lock the nut. Repeat for the other direction, see if that works.
Another thing to try:
Establish a large reservoir of hydraulic fluid into the fill point; a large funnel filled with hydraulic fluid would do it.
Disconnect one of the hydraulic hoses and place it in a bucket. Work the wheel to pump lots of fluid through the system to dislodge and move the air bubble out through the disconnected hose into the bucket, then put everything back together again.
well, those are Peter's suggestions, though he says that it's hard to diagnose, or propose solutions, from this distance. He says you need to find where the air is trapped (with X-ray vision, perhaps? was my response to that suggestion).
I would like to hear what finally worked.