Regarding the elimination of the DCS/DCC selection switch I'd bet it wasn't a cost-reduction move. It was probably a customer complaint reduction move. I wonder how many people, unaware of DCC at all, accidentally flipped that switch and then called MTH or their LHS complaining about this hunk-of-junk that suddenly stopped running.
You're exactly right, and we received a Service Bulletin stating that exact fact. Also, since it's till on Premier models, I've personally sent back at least half a dozen locomotives that were dropped off as non-functional after flipping the switch and reviving them.