I have two thoughts. First, ensure that the configuration for that component in Processor Expert matches as well. I suspect you've already done that about ten times, but... you know tech support. "Is it plugged in?"
Far more likely, since you report that randomly it works as expected, it may be a hardware problem with SW1 or the wiring to it. The only way to confirm this would be to have another board to test against. If you really like to beat your head against a wall, you could find some other demo that used SW1 and see if it also behaved randomly. I do not recommend this unless you really enjoy seeking frustration, however.
The good news is that everything else is working, and the point of the tutorial has been achieved. The bad news is, you may have a slightly bum board.