Do these two work together the way i want them to?

"Who else is secretly with me?" During force construction, Characters that have the Avengers keyword have the Hydra keyword. <...>

"TWO HEADS SHALL TAKE THEIR PLACE!": When another friendly character with the Hydra keyword is KO'd and actions resolve, you may give Imperial Hydra an action token. If you do, roll a d6 that can't be rerolled. 4 - 5: Place a character from outside the game with the Hydra keyword of 40 points or less adjacent to Imperial Hydra. 6: Place up to two characters from outside the game with the Hydra keyword of 40 points or less adjacent to Imperial Hydra.


Will Captain America give avengers on my sideline Hydra to be called in by Imperial Hydra?

From the Wizkids Rules! site, Errata and Clarifications:
Sidelines
[C]Game elements on your sideline are part of the game, but are not considered part of your force during the game or your starting force for force construction purposes. You may not use the effects (Powers, Combat Abilities, Traits, etc.) of any game element on your Sideline unless an effect specifically mentions otherwise.

Bold is mine for emphasis. Sideline elements are not part of your starting force, so they would not gain the HYDRA Keyword.

Correct. Same as how you can't use Welcome to the Legion a sideline character to use with Composite Superman.

While the information you guys are giving is correct, it's not actually the reason why the OP's scenario doesn't work.

"TWO HEADS SHALL TAKE THEIR PLACE!": When another friendly character with the Hydra keyword is KO'd and actions resolve, you may give Imperial Hydra an action token. If you do, roll a d6 that can't be rerolled. 4 - 5: Place a character from outside the game with the Hydra keyword of 40 points or less adjacent to Imperial Hydra. 6: Place up to two characters from outside the game with the Hydra keyword of 40 points or less adjacent to Imperial Hydra.


[C]Some game effects will state that a game element can begin the game from “outside the game”. Game elements that begin the game from “outside the game” are not included in your starting force or Sideline. The game elements are kept off the map, but must be revealed when revealing forces and must be visible to both players at all times during the game.

Game elements that come from outside the game aren't part of your starting force or sideline at all. Even if Cap could give keywords to characters on the sideline, it still wouldn't work because the figures brought into the game using TWO HEADS SHALL TAKE THEIR PLACE! come from outside the game.

I failed to notice that how the OP's question is worded is not how the game effects are worded (sidline/outside the game). He asked about sideline, I gave sideline. Good catch, PS!

Yeah, it's not a big deal. If anything it also shows the OP that characters on your sideline don't count for things that come in from outside the game and that the wording of powers is important.

I was I under the impression that in tournaments anything that called in from outside the game could only chose from things on your sideline. Is that not the case?

Outside the game and sideline are two totally different things. Your sideline has no impact on effects like this.

Figures on your sideline are very much inside the game.

If you are playing Imperial Hydra then you need to bring an extra box of Hydra figures that cost fewer than 40 points.

Worth stressing, and already posted by PredatorSmurf, but with altered BOLD for emphasis:

[C]Some game effects will state that a game element can begin the game from “outside the game”. Game elements that begin the game from “outside the game” are not included in your starting force or Sideline. The game elements are kept off the map, but must be revealed when revealing forces and must be visible to both players at all times during the game.

So, even though you have "outside the game" pieces, your opponent must be made aware of their presence, and they must be "visible" at all times.