HazelNuts39:
I seem to recall a line of thought that went this way:
that if he was looking at the V/S, and the V/S was "pegged, (at a max value) he may not have recognized how fast he was falling, and then thought his V/S display was wrong.
I may have mis-remembered a number of previous discussions on this, but the guess along that line of thinking is consistent with a general breakdown in instrument scan. His significant change in altitude (an error) when flight condition and route called for straight and level flying, is also a symptom of a breakdown in instrument scan.