Here is something that is commonly missed and my dad had this trouble with PS1. To leave reset mode, you need to keep the voltage low. My dad would turn on the engine and have the voltage cranked anywhere from 12 to 14 volts and it would just "ding" at him. I told him to power up the track to about 10 volts and then hit direction button. Worked like a champ every time. My guess is that this could be by design to prevent "Rocket Launching" your engine.
The other thing I notice is that your are using a Z750 transformer controller. I have a few these, and about half them are what I consider to be "bad". The bad ones will run old postwar just fine but they modify the pure sine wave so poorly that they play havoc with anything that has electronics (even the old MPC horn boards). Someone can correct me if I'm wrong, but the way I understand it is that your PS1 engine thinks the voltage is too high to leave reset mode because the modified sine wave still pulses max voltage. This is why the MTH TIU also has a "PS1 Startup" command.
I have the best luck with postwar transformers, the MTH Z4000, and newer transformers that are not solid state. I have also used the newer ZW's with success as well.
