Chris,
The circuit I am using is very simple:
The 10v AC is from the same transformer that I am using for track power, so it has the same common as my isolated rail feeds. The Arduino pin is set as INPUT_PULLUP initially, and then it goes to LOW when the optocoupler is activated. I think JGL is just using a separate 12v DC source to trigger the optocoupler. He also added a diode on the inputs. The ground of the DC is connected to the layout ground.
Here is a link to my Arduino sketch.