Bernie does sustain work via midi control? Hook up a another keyboard as a controller and see if sustain is active using the sustain jack on the controller. If it works, I would then think it is a hardware issue(Korg internal), if sustain does not work, most likely a settings issue on the Korg.

Bernie , also did you try assigning hold to the other pedal input? If it works then it is the sustain input problem.