The commercial pilot and mechanic were conducting a maintenance test flight to facilitate a dynamic track and balance of the main rotor system when the accident occurred. In a written statement, the pilot reported the helicopter was in a three-foot hover, moving forward, when control was lost. The helicopter subsequently collided with terrain resulting in substantial damage to the fuselage. The pilot reported the left cyclic control was removed prior to the flight; however, the protective cover was not installed. He stated that during the accident flight, the test equipment (used for track and balance) "became entangled" at the left cyclic attach point and prevented full cyclic control.