Hopefully this helps... You should be switching the power (AC Hot) which should be going to the center rail. So transformer post A for instance on a Lionel ZW should be wired to the center terminal on the switch. The outer contacts on the On-Off-On switch should be wired directly to the center rail of the siding, spur or block that you are trying to turn on or off with the switch... It sounds like you neglected to put an insulating pin, (plastic) or at least have a 1/16 inch gap in the center rail of the track, between the main and the siding or spur.... If you don't do this the main line power will flow into the siding track, as soon as you push the track together, and the toggle switch is meaningless...
Also, not over complicate, but it helps to understand the bare minimum about AC track power.... The A, B, C, D terminals on transformers are putting out AC hot ( 0 - approx. 20 Volts AC ), the return path for the electricity is the AC Common, on most transformers, it's labeled common... The AC only powers the trains engine and lights when the circuit is completed.... So when you move your toggle switch to the OFF position, you're breaking, or "opening" the AC hot line.
Again, hope this helps more than it hurts.
