Secarider - I apologize for not being able to help you resolve your problem but thought I'd share my 'similar' story with you FWIW.
A few years ago I experienced the exact same problem (on a different engine though). Very frustrating, especially when you've just bought the engine. Anyway, I initially resigned myself to the fact that the electro-coupler would have to be replaced to 'cure' the problem and so, because I'm a neophyte when it comes to repairs (and would probably screw things up worse), I dejectedly shipped it off to a Lionel service rep. However, when I got the repaired engine back I was surprised to learn that a new electro-coupler was not needed to fix the problem. I don't know what it means but the invoice simply stated "Determined False Firing. Installed a non-polarized electrolytic cap on rear coupler/prevention."
Good luck in getting your engine fixed without incurring too much cost.