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I have no idea what the waveform is, just that it says "12.5V". The Lionel is plain old full-wave DC, straight from the rectifier. This weekend I'll try running it, in the box, using the MRC. Didn't think to do that while I had it disconnected from the layout. Since the manual says not to exceed 21(?) volts, I might just buy a cheap G scale powerpack, if there is such a thing.More likely I won't run it at all. I really don't need a steam loco on my standard gauge, and VERY seldom run the ones I have, so this was bought more "because it is SP&S" than because I had a use for it. It can join my CC/Kato GN S2 in the closet.
I just reread your descriptions of your problem, and now I get it. So it only fails to work if that MRC hand-held is in there, in between the Lionel source and the engine. I didn't think there was much inside those old MRC hand-held things, but does it have a typical heavy pulse like some of the MRC tech power packs had (like the 2500?). Do your engines growl when starting up and running at low speed? Heavy pulses do confuse decoders and could be the whole source of your woes. You could try slapping a big electrolytic cap across the outputs of that 55 (being careful of the polarity, of course) and see if the Challenger will work. That would point to pulses from the 55 surely being the problem.
Maybe the pulses are his problem, but it is more likely due that they do not result in enough voltage inside the decoder for it to decide that the voltage is high enough to start driving the motor. Why? Because the sound part works just fine. If the pulses were messing the decoder up, wouldn't the sound also act squirrely (a highly technical term)? But either way, the result is a non-running loco.
It's a beautiful model, and in spite of the size, and number of wheels, is easier to put on the track than my Kato electrics. But it is definitely intended for DCC layouts.
It will be a straight DC engine after that
On my layout, with its tight-NMRA clearanced, hand-laid turnouts...I have to re-gauge my Athearn Challengers and Big Boys so they don't "hop" through the turnout frogs, but on Nate's with his code 80 Peco turnouts, it runs without a hitch. To be fair, the only engines I haven't had to re-gauge are my Kato FEF's, each of which have been EXACTLY properly gauged out of the box.Cheerio!Bob Gilmore