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Reply to "Running two trains conventional and Lionchief"

I have a similar related question.  Right now I only have a temp layout with two loops of completely separate tracks About 12 feet long with one setup of 036 curnves and one set of 048, but that's not really important, just that I have two loops.  I have 2 different MTH transformers for power.  When I want to run one of my lionchief trains I just turn the throttle up and use the remote one that one loop.  Right now there is no other track, so easy and I fully understand how to run the lionchief with my normal transformer.  I want to build a two loop permanant layout with a crossover using 4 switches and a siding on the inside loop.  With my DC powered G scale or HO/N trains I have blocking for using 2 or 3 transformers to control the loops, using insulated track sections.  However, with the O scale AC powered track/transformers how can I isolate the loops so I can run standard train on one loop and lionchief on the other loop at the same time, and leave a train on the siding too of course.  Is it possible to do this and not isolate all 3 rails?  In other words if I insulate only the center rail in-between the two swtich crossovers, can I run l lionchief on one loop of track, and conventional on the other loop at the same time?   Will the outer rail connections be ok if they are connected?  In DC it is fine, it is common ground wiring and blocking where only the hot (+) rail is blocked.  I just have not done this with AC transformers before.   I will include an example track diagram. My second question is how do isolate between the O36 switches without adding one of those 1 3/8" fastrack sections that can isolate the center rail, like I have on the siding?

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