I read the review and it was noted that although there is a plug for the DCC decoder, one hasn't been made for this loco as yet. More's the pity really, I wonder why they didn't let the decoder manufacturers know about the loco before they released it?
Anyway, what one would fit and, would it cancel out any hope of the headlights working properly?
The Digitrax DN-123K3 is the decoder that works in the Kato NW2. When the review was written , it was not available yet, but it is now. It does have LED's for the headlight, but I do not know what you mean by the headlights working properly.