That's right, in reality a ship can't make useful headway with just the fore and aft canvas, at least not upwind in ordinary conditions. The ratio of sail area to windage (rig and hull) becomes so small that the leeway angle will eat up all the gains.
Actually in the older version, the behavior was just about perfect. If you tried to sail upwind into the 'no go zone' the ship would naturally fall off again.
Did you make a wide variety of changes to lift settings in this version? Or just change some of the existing variables in the in-game Physics menu as a default? I've half a mind to do some experimenting on my own and try to find a happy medium (because the old version truly was punishing with regards to upwind performance).