The wire for the non-derailing feature that connect to the yellow (diverging route) seems to be the problem. Switch threw under the train with both non-derailing wires connected. When I threw the switch straight and backed the engine through from the frog end on the straight route, the switch threw curved, but the green LEDs remained lit on both switch machine and DZ1002. Removing the non-derailing wire for the diverging route/yellow made everything else work again.
Still scratching my head as to the mechanism of the problem.
