Yep, each yard track has a lighted bumper at the end. I thought about a more exotic solution, but in the end simplicity won out in my thinking.
Right now I'm looking at a handful of diodes, a choke, a capacitor, a resistor, and the relay. In addition, I don't have to hack any of the existing wiring, just tap into it. I'll be able to assemble this all on a small board and just stick it under the layout at the control panel where all that wiring is already available.
I can visualize how your solution would work, but it would be more work. I believe I'd also have to hold off the power to the track as well as the TIU channel. A brief power interruption of the TIU channel probably wouldn't be enough to trigger the watchdog output. I'd also have to add some logic to know when the switch transitions take place to control the action. Not difficult, just more parts, and more work.