Ah I see.
So being that a damped spring does work fine, hover wise, your reason for suggesting a PID thruster was just for better hover behaviour? Smoother and faster transitions to the desired hover height?
Also, could you explain your 2nd point a little more? In particular, I don't understand this line "Take a unit vector normal to your track that passes through P(t+dt)". Everything else makes sense.
Regarding disabling gravity, I recently played Wipeout 2048 - and noticed that in the zone tracks, you stick to the track like glue (or like a rollercoaster) even when going over a steep vertical drop. As if there is no gravity as such, more that your ship is constantly being adjusted to be a set height, as if the PID algorithm for example was adjusting the "error" below or indeed above your desired hover height. Or a bit like spline following behaviour.
In contrast, normal races in 2048 have standard gravity behaviour, more like what I have now in my game, where by going over a large drop would have you soaring through the air and landing a couple of seconds later.