So here's where my ignorance of K-line track rears its ugly head! Someone more knowledgeable can fill in the blanks but here's my attempt at your questions.
As I understand it, the K-line insulator pins allow you to create an isolated trigger section in the outer-rail. Or, it could be the last section before the bumper for the A, B, and C sections. I believe the idea is the K-line insulator pins provide structural integrity without electrical connection.
I figure this photo of a K-line switch I dug up on the web represents what you have. There are 3 terminals which normally go to the manual lever controller. As has been discussed earlier, one of the 3-terminals is the outer-rail (common power connection). It's the other 2 terminals that I'm calling SwM A and Sw B. That is, you momentarily touch SwM A to the outer-rail and the switch snaps to the A direction. Momentarily touch SwM B to the outer-rail and the switch snaps to the B direction. I'm sure if I searched harder I could tell you which of the 3 terminals is the outer-rail terminal and which are the SwM A and SwM B terminals...but I'll leave that exercise to the student.
As to the yellow wires (alligator clipped to the outer rail in my photo), this is an artifact in that the MTH Realtrax section do NOT internally connect the outer-rails together. I don't know how the K-line track sections are wired. So the Realtrax, I simply added the yellow wires so that BOTH outer rails everywhere on this contrived "layout" are connected to the transformer common. Of course everywhere means everywhere except the isolated trigger sections IA, IB, IC.
Again, showing my ignorance about K-line switches, when you ask about insulating pins to the switch section, my understanding is this has to do with anti-derailing. In theory you will never need the anti-derailing function in this application because the switch will always be set to the proper position! So if I understand your question (which is itself a question!) I don't think the switch's outer-rails need to be isolated. Someone please enlighten us if otherwise.
The green alligator clip is just an alligator-to-alligator jumper cable from IA at top of photo to the relay module at bottom of photo.
Let's just get this contraption working and that will be appreciation enough!