IMO, I would go with Lionel Command Control locomotives for all the bells and whistles you're talking about. I tried MTH's system in the '90's and found it much more difficult to negotiate around to get proper operation (too counter intuitive for my thick skull).
I would say all O-gauge rolling stock is compatable with one another. The one constraint would be minimum radius requirement for the longer cars.
It would be nice dealing with a local hobby store for your purchases, so that you can get instant feedback for your questions with visual reenforcement in many instances. Example: He should have a layout or test track to demonstrate the operation of locomotives and controls.
Have fun!
