A B717 First Officer experienced difficulty flying a raw data ILS approach when the autopilot disconnected following an unstabilized glideslope signal.

Narrative

On approach on ILS Runway XXL in ZZZ with my First Officer flying; the autopilot disconnected by itself about 1;200 FT AGL; and I noticed that the GS was very unstable almost bouncing up and down. First Officer just looked at me and said what do I do now? I noticed that his FD LOC bar had also disappeared. I told him to fly the airplane using the raw data information that was still displayed with a good ID. He said 'what; down to minimums?' By this time he had gotten high on the GS and I helped him get re-stabilized on the GS and LOC. About this time the Tower came on and said that they had a 'low altitude alert' on us. I responded and told Tower that we showed us back on LOC and GS. By now we had broken out and had visual contact with the runway; so we continued the approach to a full stop landing with no other incident. We told the Tower about the intermittent GS signal; which the next landing aircraft confirmed. Make the First Officers shoot ILS approaches in training without autopilot; autothrottles and FD to help support basic airmanship skills. Callback conversation with Reporter revealed the following information: The reporter stated that the First Officer had been with the company for two years and prior to that had flown commuter aircraft for a number of years. The Captain believed the First Officer's initial reaction was to go around and try for another coupled approach rather than the fly raw data that was available. They talked about this event on the ground as an educational exercise for both pilots and decided that pilots should be taking responsibility for remaining current flying glass cockpit aircraft in their most basic modes.