Hi P16,
The course to steer is exactly that - a course, I.E. a track. GPS systems are not really capable of differentiating between headings and tracks. (The trilateration process can only calculate where you are and where you are going, it has no idea in which direction you are pointing)! So to answer your question it will only account for the crosswind by altering the course to steer, which is like homing to a radio beacon. To track to the next waypoint I would personally use the max drift method to calculate a heading, but unless the wind is howling the 'bit to the left/right' method will normally be good enough.
The instruction manual that comes with the 196 is a bloody disgrace imho. I would thoroughly recommend 'Flying with GPS', by Stephen Clark, I think its available from pilot warehouse and transair. It has all the gen for the different handsets, and even a few extra tricks, such as how to track VOR'S with them.
Cheers.