This is normal, at least that's what ZWO told me a year ago when I asked about this very thing. My S50 has similar amounts of play in both axes. I even measured the equivalent angle and it is about one degree. The S50 is designed to work with this kind of backlash, when tracking it only moves in one direction, in both Alt and Az axes. When that's not possible it moves, recenters and uses plate solving to confirm position. This probably explains why after a sequence of a few successful 10-second exposures it drops frames for a couple of minutes and then recovers. The very common "star trails" and "not enough stars" error messages are probably related to the same thing.
Do not send it back, I have used my S50 for a year quite successfully with this amount of backlash.
