I've just started doing fair isle on the 305.
Do you have the manual? It's quite intricate, you need to keep all the needles on C position, make sure the latches are open, and one of the yarns goes weirdly above the needles, the other into the feeder as normal.
Holes happen because the needles are not exactly in C position so will drop stitches.
Email me (I'm not normally on this forum, just found it while searching) and I'll scan the relevant pages from the manual. It works if you follow the instructions step by step.