Friend had a similar problem - after much tries of different things, found that the transformer being used did not go to 0volts in the off position (memory not good, but I think it was a Z4000). In his case, putting an incandescent bulb across the transformer output (i.e. putting an illuminated passenger car on the track behind the engine) fixed the problem of getting the off voltage to be 0. Lionel confirmed this non 0volt off can be an issue, and the incandescent bulb is a fix, and what they themselves use.
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