CruiseControl does not turn off the motors. It reduces them to 5% (unless you have throttle stick at zero). If you have your motor neutrals set too low, this can look like the motors are off, but they are at 5%. Librepilot will increase this 5% to whatever is necessary in order to achieve stabilization or stick control. Also, 5% is only the default value. You can set it as high as you want. Configuration -> Stabilization -> Expert -> MinThrust
If your quad is small or if you have a battery with less cells, you can put on a coat and glove for arm protection and test just how strong it will correct from inverted in Attitude mode with CruiseControl with current LibrePilot (but much less with old / OpenPilot). Stop the motors by using zero throttle, flip the quad inverted with your hand, hold quad very tight upside down and add a small amount of throttle. It twists very hard to get back to right side up. It sounds like you had some other problem (receiver reboot, out of range, using old firmware, kept stick at zero throttle the whole time, etc.).
I just did this with a 330 quad that uses low RPM (1000KV) 2212 motors and 3s battery but this test with a 2s battery. It was set up with Rattitude and CruiseControl. It acted just as described. You really need the reduced cells battery to do this test safely.
Also, past a certain falling speed, props are stalled out even at full throttle and don't generate thrust. That happens sometime around 3 or 4 seconds of free fall. Theory seems to suggest that it can even get stuck upside down because of control reversal due to a spinning prop causing more drag than a stopped prop.