Autopilot Limitations
Usable Speed Range 90 –> 180 KIAS Min Height (APP & DEP Phase) 200′ AGL Min Height (All Other Phases) 800′ AGL Min Height (Altitude Select Capture) 200′ AGL
The autopilot and yaw damper must be disconnected during takeoff, landing and OEI operations.
It's been over 10 years since I've flown a DA42, but from the limitations you are quite correct. I do know that there are two types of A/P installed in the DA42 though. Maybe the type you flew had approval for AP use whilst OEI? On a personal level, I'd rather hand fly any light twin whilst OEI.