I actually kicked around the Mega idea as well, and it may be the way to go. I was leaning in that direction when I got sidetracked with other projects. I don't have a schematic for this right now, but here's a PCB layout I did for a controller for 8 switches.
The Mega plugs in on the bottom of the board and other connections are on the top side to save space. It has 16 inputs for the anti-derail function on 8 switches, and outputs for 24 relays. 8 for the red/green signals and 16 for the relay coils. While I plan to use the 12VDC of a power supply, the inputs are good for upwards of 22VAC track voltage. There is also a header to connect a driver so that the brightness of the LEDs can be adjusted. I added a set of headers as well to connect a RS485 module to allow this board to communicate with other boards or a master control unit. The plan here is that you could locate the relay boards and this 'motherboard' with a Mega2560 near your switches, then run just 3 wires over distances of hundreds of feet, if needed, to a control panel or master control unit. Another unit would be at the control panel and light up panel lights and allow push-button control of the switches, as well as control from TMCC. One could also use DCS to control their switches with this set-up, but I'm not going to get into how to accomplish that at the moment. The header labeled 'watchdog' however has nothing to do with DCS. Instead this is to attach a watchdog timer that will reset the Arduino if it hangs up for some reason, preventing a glitch from causing a derailment if the Arduino were to lock up and stop functioning.
I need to actually assemble a prototype before I'll be sure everything works as planned, but I don't see any reason it wouldn't. I'm thinking of adding an on-board 5v power supply, but my preferred method is to use an ATX computer power supply to power the Arduino's, relay boards, and other associated things.
JGL
