Toy train operating and collecting

CTT has a diagram for an electronic control for a signal bridge / block signal that I'm attempting to build. The power pack is a LW and the track is O-27.

I inserted a single insulated straight (6-12841), with a 6-14112 lighted lock-on, between two curves and pulled out the metal pin on one of the curve pieces to accept the insulated pin. I wanted to see the light come on as the train passed before I went any farther.

To my surprise, the light came on as soon as the power was applied to the track, train or no train. Something must be completing the circuit.

I took off the track clips and replaced the lighted loch-on with a plain CTC with a voltage meter attached. The voltage meter followed the voltage as it was applied.

I then removed the insulated straight and checked it with the VOM set on resistance. It checked out with a "short" across the two outside rails but the center rail was insulated.

I replaced it with another new carded piece and it seems ok. The lighted lock on only illuminates when a train is present.

How do you fix an insulated track? The would-be insulated rail has a black material just like the center rail. How do I find out where the short is?

Thanks, as always.

You might be able to find it with heat.  If you connect your transformer to the two outside rails, the fault may heat up enough for you to feel it before the circuit breaker trips.

Of course, you can remove the "insulated" rail and look at the insulators.  If you reach this point, consider removing them one-by-one.  You might get lucky and only have to remove one or two.