I stumbled across this glitch today and found a couple posts online describing it but no one had posted any solutions. Product of several hours of trial and error here is my solution:
Problem: The Auto Swell stops functioning completely
Cause: I have narrowed the cause of this problem down to the 12 additional effects added in the POD X3 Live Flash Memory v2.0 update, specifically the Frequency Shifter
Solution: The Auto Swell can be restored by simply reflashing the memory using Line 6 Monkey. Once you select a patch containing the Frequency Shifter, or select that effect in any patch, the Auto Swell will once again become unusable until the memory is reflashed. I have only verified this with the Frequency Shifter but it is possible this glitch may be caused by any of the 2.0 effects. List follows:
Since selecting the Frequency Shifter breaks the Auto Swell (I also noticed other filter effects were effected) you should never save a patch with the Frequency Shifter. If you must use it simply don't save the effect on the patch and flash the memory when you finish playing/recording.
I have not tried it but I assume rolling back the POD to pre 2.0 flash memory would fix this glitch at the cost of losing the above listed effects and any other fixes included.
I hope this saves some people aggravation. I wish there was an easier fix, I hope Line 6 addresses this issue in a future update.