I agree it's a false positive, and I freely admit without further analysis that none of us really know why it's happening. The point of recommending the PH180 test was to insure that it wasn't a real overload.
Actually, when the light is blinking, the voltage is reduced, which is why he's seeing the surging of the locomotive. From the ZW-L user's Manual.
When there is a short on any of the outputs it will reduce the voltage on that output in a fraction of a second to hold the current at 10A. If the short circuit is not corrected in 3 seconds the transformer will interrupt power to that output.
I believe this voltage reduction is what causes the surging he mentions.
Another possibility is the power factor shift when running AC motors, that may be triggering the over-current sensing.
