Do you have both rails at both ends of the reverse loop totally isolated from the rest of the layout ? It sounds to me like only one end is insulated so the ARP can't reverse anything.
I just installed a digitrax auto reverser on my layout. When I first hooked up the wires I heard a click coming from the AR when I checked to see if the loco I put on the track was moving, it did not except the headlight was on.
After a while my zephyr track on light started to blink green and fade.
Any help would be great, as I am totally lost
thanks
DT