Coaxial rotor helicopters at the Micro Air Vehicle scale are becoming widely accepted as an easy to fly and stable configuration. This study models the heave and yaw modes of the vehicles dynamics, based on the aerodynamic interaction of the two rotors. The linearized model is represented in state space with a closed form solution. It is then evaluated for its stability and control response. The coupling between the height and heading transient response is evaluated. Based on these characteristics, a technique for control mixing is proposed for the ease of pilot control and also closed loop design. The steady state values of the model are validated using typical parameters of a commercially available vehicle. The predicted thrust sharing between the rotors is found to match with that reported in experiments. The effect of the interaction between the two coaxial rotors on the system performance and stability is analyzed.