Your instruction manual wiring diagram and instructions are so screwed up, I don't know how anyone can properly wire their layout following these instructions and drawings to the letter. I've got the same instructions with my switches, but I didn't pay any attention to this particular section when I put my layout together. Thank goodness for that!
First off, if you are using an SPDT switch to route power as they show, then you need to wire it up to the center rails (which they don't show in the diagram), and not to the "outer" rails. And isolate the center rails, of course. If you have at least one reversing section (which you do have), then an outer rail can become an "inner" rail as you travel through a reversing section, and thereby cause potential electrical problems.
As far as isolating rail sections, don't bend out the brass copper connectors if you wish to electrically isolate a connection. Why ruin good pieces of track? Simply put a small piece of electrical tape on one (or both) of the copper connectors to prevent them from contacting each other. Make sure the rail ends don't touch either, as we have previously learned.
If you are powering your switches through the track, then the momentary power draw as a switch "snaps" may be causing your problem. You may wish to try powering your switches through the accessory output of your transformer or else a separate transformer.
Just some suggestions, hopefully this helps you further along.
