It has been a few years since I used a heli tow. The company I now work for finds the human version cheaper to employ.
When I did use one we had a similar problem. If I remember correctly there is a micro switch that detects that the socket is correctly engaged on the helicopter's towing ball. The up/down motor is inhibited by this micro switch. The locking solenoid still clicks but the arm will not move.
Ours used to need some grease to keep it working properly. It's the switch shown next to the solenoid (wires annotated 913/951) on the wiring diagram for revisions A to E. The maintenance manual is freely downloadable from the RHC site.
Looks like they changed the design from revision K onwards to solve this particular problem.
Hope this helps