You basically answered your first question, the second about insulating; if running another DCS circuit or other transformer than I will say yes. If running only DCS equipped locomotives you just have to power down on the handheld remote to shut off a locomotive. You can run any number of locomotives on a track but you must assign them an address on your handheld remote control device.
Lee F.
I run a fairly large layout with DCS. 2 TIU's running in Super Mode. I don't have a lot of complicated trackwork but it covers a large area and is basically a walkaround. I have a passenger yard that is a matter of a few feet from the TIU that serves it. Problem is that few feet is an aisle. From the TIU output there is at least 30 feet of 12 gauge wire travelling up a lally column, along a beam and down a wall, then under the benchwork. This feeds a terminal strip that branches out through toggle switches then to the rails. The runs from the terminal strip are fairly short. Still the track voltage and DCS signal are travelling 30 feet off of the TIU. Works fairly well with good signal strength using what is basically the original common ground wiring method and toggle switches.
As far as insulated blocks. The theory is to centrally place your terminal strip. Then run paired wiring to your track. Each paired wire can run about 10 feet of track. Each approximate 10 foot section is insulated at the center rail from one another. The key to DCS is the signal strength the engine is getting. The better the strength. The better the engine recieves commands from the TIU.
Mine is an older layout built on the common ground theory of wiring. Large buss wires with feeder drops. DCS worked horrible when first hooked up. About a months work of tweaking. Not rewiring netted a 10 for signal strength.
My advice to anyone purchasing DCS and incorporating into an existing layout is simply. Hook it up and do a signal test and see where you stand. I've seen it work fine on buss wired layouts with a common ground system. The lightbulb trick across the TIU output can work wonders. No need to fix something that may not be broken. If the strength is an issue only as a last resort would I rewire. If you are starting from scratch. Buy the system so you can test as you go along. Also follow the recommended wiring practices. Good quality 14 gauge speaker wire seems to work well. I added a staging yard and followed the MTH wiring specs and it worked fine.
Felix, If you are planning on only wiring one loop for DCS. If it is isolated from the rest of the layout it should be no problem. As long as you have a DCS signal on that loop the engine will remain silent till selected. If that loop connects to an adjacent loop via some turnout and that loop is not wired for DCS. Yes you will need to isolate the 2 with a break in the center rail. The problem lies that in the case a switch gets thrown accidentally and the engine ends up on the non DCS loop. It will run at the voltage present on that particular loop. Which could be warp speed. Unless the loop is completely isolated I'd incoporate DCS into the entire layout.
Looks like you have a Roanoke sound box beside your transformers. Had one years ago when the trains ran silent. Ended up giving it to an HO friend when everything became sound equipped.
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