Interesting issue I ran into last night while wiring my crossover I am using DZ2500 with the Lionel breakout boards. The rail that is attached to the green cable off of the master switch causes an arc when the locomotive goes over it. However when I wire the green and yellow directly from the switch directly to the cable and relay bypassing the breakout board it goes away... It could possibly be a faulty board, but I tested them all pretty thoroughly before installing them. So a resolution was found, but still left me quite confused...
I have a hard time following Ross's (and Z-Stuffs) diagrams so I built new ones that are somewhat easier for me to follow. Even though this is for the DZ-2500 machines and not the DZ-1000s, how the relay is hooked up is the same. Maybe it will help.
You may only need the diamond powered for your trains to cross. I power my diamond from a wire from the center rail. If the engine still stalls after the diamond is powered, you need rails '1' and rails '2' powered. To ensure you have correct polarity when the train crosses the diamond, you will need to use a relay to alternate power between rails '1' and rails '2'. The DZ-1008A is a bit expensive but works with the DZ switch machine.