Is this a DC servo?
Is there a balance adjustment pot on the drive? This would usually be adjusted to stop drift, rather than oscillation, I suppose. But, I think that if the encoder and motor are hooked up backwards relative to one another, you will get a runaway condition, not an oscillation. Of course you checked that the encoder is tightened in its coupling to the motor?
First you get good, then you get fast. Then grouchiness sets in.
(Note: The opinions expressed in this post are my own and are not necessarily those of CNCzone and its management)