Does the transfer system apply when it is in hover mood, and if so how do you control it effectively?
"I'm in the mood to hover...simply because you're with me..."
I'm surprised by the general cogent thought that's gone into this thread.
The "transfer system" is always in motion. The Interconnecting Drive Shaft (ICDS) is turning whenever the rotors are. It also drives a group of accessories on the Midwing Gear Box (MWGB), located, oddly enough, midwing. When one engine stops, the Flight Control Computers will try to satisfy the pilot's input by doubling the power demand signal to the remaining engine until it reaches a limit. They will also tell the actuators on the proprotors to adjust pitch maintain the selected Nr (84,100,104 depending on what you're doing--a whole other story).
Controlling it effectively is merely a matter of managing the lack of power from losing one engine. The controls and control authority are still exactly the same as dual-engine. It requires less power in APLN mode, so if you have to go a ways, you'd probably transition. I'd probably consider a run-on landing to reduce power req'd (and yes, a run-on is done with the nacelles at 75-deg or more).
Single-engine, you're way better off than in most helos. With a dual failure, you'll definitely have your hands full, but it's doable. I've flown practice profiles simulating a dual failure in APLN, and it's not that bad. It's no Rutan glider, but it doesn't sink that bad. You spend 99% of a tactical flight in APLN, so that's where I'd worry the most.