Maybe I missed something here?
What version is your TIU? Version L or older? If older do you have lights or filters attached to the blocks?
Are you removing all TMCC products and any lighted cars from the rails for the signal test?
Have you tested your TIU on a single piece of short track with a single engine for signal strength?
It sounds like your are jumping in too deep all at once and not troubleshooting correctly. I do not know your history though.
Okay so this right here, I have a lionel Vision Line Big Boy that I like to keep on the tracks just cause it looks cool and its fun to run on the short line I have in between working on the layout. I took the Big Boy off and am now getting 10s and 9s on the entire line of track. I am not sure what this means, can I not run my lionel engines or have them on the track when running DCS? My TIU is a rev L, and I have tested it on a single piece of track, my power comes from a single Lionel Powerhouse 180 but I am getting a Z4000. The gauge wire is the regular atlas terminal track joiners
I have been testing the signal with 3 different engines, A PS3 Veranda Turbine, a Ps2 Rs-3, and a Ps2 Gp38-2, I have tested max 2 at once but usually use the Veranda.
Your Lionel/TMCC equipment should be on it's own channels. You can install chokes inside the equipment if you wish to run them on the same power supply. I read of people having them parked on powered sidings and I advise them to add kill switches to those sidings. Many don't wish to open up each piece and/or solder in chokes so I suggested to keep them separate.
The power dip thing is or can be caused by drawing too many amps thru smaller wires or weak connections and can also cause the DCS signal to suffer. Your issue appears to be just interference caused by the Lionel equipment and not your wiring. However your wiring may tie the TMCC/Legacy signal to the DCS rails by the way you have it wired. I have seen this draw the signal down.
So..... the simple thing to do is take the Lionel off the rails (or on an electrically turned off siding) when running MTH, or.... rewire and have totally separate loops, or.... add chokes to any equipment causing issues, or..... ???? ( I can go on and on here but I'm just throwing stuff out there). It's all about knowing the issue, and maintaining a work around.
Most here may have power dip issues if they start running large consists of engines and most would never know of issues until that occurs. An average layout with just one or two engines running won't have these issues show up usually, unless they get very bad.
I run five or more engines per consist on a loop of track. Power issues become apparent right away. Signal may also suffer until it's resolved.
If I use ten amp wire, I need ten amp connections as well. I can get that in different ways like having more drops to shorter blocks so the engines aren't all on the same connections at once.
I read of people's complaints of the DCS signal being weak or finicky. I find that's not really true. It's more a power distribution problem that shows up with a loss of DCS signal. If the power is good, the signal will be good. Then there's always the exceptions to keep me humble. A single signal killer might not ruin everything until it's joined with another issue and then I start pulling my hair out looking for an issue that's really 2 or 3 things at once.
I never installed chokes in my Vision line tank cars for example. They usually only drop the signal just a bit. If there's another problem and the tank cars are also on the rails, the combination magnifies the loss of signal.
I can't have my TMCC brick tied to my 2 rail layout in any way without some DCS signal loss. It can be tied thru the power supplies (my Z4000), TIU's wiring, etc. I unplug it from the wall when not in use. Sounds like a pain but I don't have a lot of TMCC engines.
I added many lines to this post and haven't proof read it. I say this incase it's incoherent!