Right, here's a weird one...
I've got a pair of Instek PSP2010s on the bench with more or less the same fault. With the current limit set below 2A or so, they fail to correctly regulate. The output voltage ripples like crazy, even though the output is completely unloaded. Voltage regulation works fine, as long as the current limit is 2A or higher. I have no idea what damaged one of the power supplies (it's had this fault since I got it), however the second unit was damaged after I accidentally connected a battery desulphator to the output at the same time as the battery. Turns out the battery was open-circuit. Fifty ish volt spikes up the power supply's output terminals.

(As Lance-Corporal Jones is oft to say, "they don't like it up 'em!")
I've a sneaking suspicion the first supply may have suffered a similar fate. Perhaps at the hands of being used to test a faulty switch-mode PSU or some other inductive load.
This power supply is widely rebranded by Voltcraft as the DPS-2010 and DPS-2010PFC, and there are doubtless a dozen or so other rebrands. The DPS-4005 and DPS-4005PFC are close twins, with different voltage ratings (40V/5A instead of 20V/10A).
I found the DPS-4005PFC schematics at
http://list.hw.cz/pipermail/hw-list/attachments/20050719/c6530da3/attachment-0003.pdf but haven't found anything for the 2010. An Instek dealer offered to send me a partial schematic (input circuitry only) under NDA, but only for part of the power board, and with all the component values removed. Needless to say, I politely declined.
[ EDIT -- there's a better version of part of the schematic here:
http://www.mikrocontroller.net/attachment/146656/512020-sp-01-en-Switching_Power_Supply_DPS-4005PFC.pdf ]
I've figured out enough of the schematic to tell that it's a fairly standard TL494 switch-mode converter, but I can't make head nor tail of the current sensing and regulation side. Looking at page 7, my instinct is that it's using Q7 as a sensing component, V27 thru V34 are doing some form of biasing on Q7 (but how and what eludes me) and the current sense signal somehow creeps out onto pin 3 of X6A. I guess N5B is the current regulation loop?
N7's function also eludes me... some form of servo loop, but clamping its own input? Perhaps an overcurrent limiter of some kind?
Anyway, there's no theory of operation, no documentation of any kind... Can anyone shed some light on this thing and maybe suggest how it might work, or some components which might be worth testing?
I'm thinking N5B would be worth a check for a start (it's clearly something to do with current regulation; ICOM is "current commanded", IF is "current feedback", so it's comparing the two and driving V24 appropriately... I think) along with the current sensing circuitry (if I ever figure out how it works...)
Thanks,
Phil.