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The antenna (handrails on steamers) is the likely culprit.  The antenna should be independent of the loco's chassis ground.  You can test this with a multimeter - should show no connection.  The antenna connection to the circuit board may be disconnected and you'll have to open up the loco to check this.  Also check that the receiver board is firmly seated in its socket.

It isn't responding to anything. I power it up expecting lights and silence but the sound comes on and the speed is controlled by the transformer. And a couple of times the rear light blinks real fast and looked really weird. This stinks because there is ALWAYS an issue when I buy a locomotive online. This is a brand new locomotive, but obviously NOS. I'm not confident, nor am I experienced with tinkering under the hood of O scale locomotives so this thing will probably go back. Would a factory reset do the trick?

6-11200 is the model number. Being that I am not you, someone who really  knows everything about what is under the hood of model trains, I think I'm going to be sending it back. I don't know if anyone agrees with me, but Lionel and MTH locomotives are not boxed to protect the locomotive from the shipping and handling process. Anyone agree?

Hey Christian....I think that you already have your answer when you wrote, "Here is something weird. In "RUN" and "PROG", the locomotive lights up, the railsounds start, and it runs in conventional mode???"  Did you first program your engine with an engine number? Your engine WILL start and run in Legacy without because ALL engines are programmed as "engine one" at the Lionel factory...and it should "run under Legacy control" once you slide the switch from "program" to "run"!!   Are you forgetting to switch back to run when trying to use Legacy?

BTW...I think most OGR Forumites wish we all lived closer together, so that we can help each other....yet, the Forum is the next best thing...PLUS...if we were invited over, I would probably drink ALL your scotch and get Cheetos orange dust all over your dog from petting him/

Keep messaging...the Cavalry is near and we are many, and we'll answer..

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