Good suggestion, so I tried again with power to my layout turned off so no chance the Lionel locos could detect any modes other then those in the track(DCC)..
I had the opportunity to attend the National NMRA Train Show in KC last Friday, I was able to Speak with Ryan at the Lionel booth and several people at the S Gauge booth! They all confirmed they had no trouble running their various Lionel/Flyer locos in DCC mode. I got the same list of possible remedies to my questions as all of you have generously suggested on this forum topic! None of them use(d) the Lenz DCC system... Most use NCE, so looks like it would be worthwhile to try testing on a NCE DCC system.