Is the failure to move in conventional a new problem, or did you just get the locomotive? I had a brand-new K-Lionel SD75 club engine that came out of the box working OK in TMCC mode, but it wouldn't run in conventional. I sent it back and they replaced the R2LC (radio) board under warranty. It's run fine ever since.
You could also have a reset issue if your engine has K-Line cruise control. This is a quote from an instruction sheet I downloaded on resetting K-Line engines with cruise:
If the R2LC is not told it has cruise, it will not run in non command.
Check your instruction manual for the correct reset procedure and codes for your engine. I have a cheat sheet that I could post, but the codes are for a steamer so I'd rather refer you to the manual in case they are different for your diesel. The code for K-Line cruise is 7, but it is entered in combination with another code.