It should be under the playfield at the other end of the subway from the mystery hole on the ball pop mechanism that brings the ball back up on to the playfield wire ramp. Switch 55 in the manual. Use a piece of paper or similar to break the beam in the switch edge test.
Sounds like the mystery hole switch is working as you are be awarded the hole straight away but the ball must be getting stuck either in the subway or on the ball pop mech.
