Eg2007,
The sleep/auto wake function is working for my case. No issues with it. Looks like you're right about yours being defective and needing to be exchanged.
My main issue right now is whether or not I want to keep my iPad air. I'm often finding myself resorting back to my MacBook Air to complete tasks, especially with Pages and Numbers. I'll give it several more days before I decide.
That said, this is the best case I tested out at best buy for the iPad air. Although, the upcoming Belkin Qode Ultimate keyboard case looks enticing as well, assuming I keep my iPad.