confuddled
Crazykid,
Perhaps I'm the one that's crazy!!
I can't say I 've heard of the setup you describe. I've looked at the web (your addy should be
http://members.aol.com/YORKtrains/mth.htm
or
http://www.mth-railking.com
and a subpage at
http://members.aol.com/YORKtrains
What you ask about is mentioned as on YORKtrains:
2129-0 BNSF Dash8 horn $130 Sep-98
2129-1 BNSF Dash8 proto $230 Sep-98
Are you saying your loco is AC powered, not DC????? Are you referring to O guage here??

I do not know what a "ac engine" is, or still understand what "feature 18/program 18" means if you are NOT running DCC.
However, I did find this on the K-Line MTH (Railking) page of the K-Line website.:
I don't want to sound an alarm quite yet ...... but, there is some evidence that the new MTH Z-750 transformer may cause catastrophic failure in the QSI sound units. Until this issue is settled, I can only recommend extreme apprehension in relation to the use of the MTH Z-750 with any QSI: QS-1, QS-2, QS-2+ and MTH ProtoSound aftermarket products. QSI cannot at this time recommend the use of the MTH Z-750 transformer with any QSI-designed product. More as it devilops.
This was dated at least 1999, as the website has not been updated since then.
I know nothing of what this means (QSI sound units etc), and I doubt anyone else here does (otherwise, they would have replied).
Couple more questions:
Does the loco have a circiut board inside it?
Does the sound generated by the loco (through the speaker) speed up and slow down according to the setting of the controller?
When you say the "other features do work", are you able to turn the lights on and off via the controller? What are "the other features" that do work?
They quote their controllers as these:
Z4000 $400 Mar-98
Z-750 $80 Oct-97
and the Z4000 specs as
Z4000 lists for $379.00
has the following features:
Pure sine wave power signal
Two 180 VA Variable track outputs
Over 10 amps available on demand to each track
Up to 22 volts available on each track
One 14V 3 amp fixed voltage output
One 10V 3 amp fixed voltage output
Internal cooling fan
On/Off power switch
Power and overload indicator lights
Expansion ports for future upgrades
Compatible with all 'O' gauge, AC powered locos
Existing Z2000 orders will be transferred to the new Z400
There is also
MTH-Raliking site
Does your controller look like this:
And the other bits look like this?:
and is this your loco?
If so, it definitely looks like O guage to me.
One thing I did notice with MTH is that it is O guage, not HO.
If it is O guage, that may explain the lack of response to your question. I'm not aware of any regulars in O guage who frequent "The Guage".
MTH also have a digital control system (DSS) which drives their protosound devices in the locos and also drives the locos. This system IS DCC. (Digital Control System) however they do not say how it functions of what standards it adheres to.
Also try the "service" icon on the MTH homepage
click here This may help.
I also found this on the "service" part of the website:
Once in PFA, the engine never goes in reverse So that the passenger station sound effects and operation is as realistic as possible, ProtoSound® disables the reverse unit state whenever PFA is enabled. This way the engine never goes into reverse as the operator cycles through the various PFA events
This may not be your problem, as you say your loco "jerks" a bit in reverse.
Again, with the little info you have provided, I'm unable to come to any conclusion as to what the problem might be.

Perhaps contact MTH direct through their website
click here
I'm sorry I'm unable to help.