Atlas O CB&Q SW1200, with TMCC??

Yes. Before Atlas settled on DCC for their high-end 2-rail, they experimented with 2-rail TMCC engines and offered several locomotives. And, yes, they run on AC, not DC, just like a "normal" TMCC locomotive. Weaver still offers their 2-rail engines with TMCC ("2 rail AC with sound").

Thanks for the info, Joe. As a 3RS modeler, I wonder if I could install 3-rail roller pick-ups on the model and run it of TMCC then?

I've converted a couple of the Atlas SW from 3 rail to 2 rail. There should be no problem going back to 3 rail, as the geared wheelsets drop right in and center rail pickups can screw into the trucks.

When I first changed to 2 rail I experimented with 2 rail TMCC as a control system (before I adpoted DCC), as Mike Regan was advocating the system when he had his own company. It worked just fine.

In fact, I believe I still have the leftover parts from my conversions, including the TMCC board, wheelsets and pickups.

I don't believe that you need the 3-rail wheelsets. Just take one axle in each truck and flip it around so that the truck is now "hot" (i.e., it would be a short circuit on 2-rail track), then just add the rollers and rewire.

I believe the reason Atlas dropped the TMCC is that Lionel keeps too tight rein on their sound files available to 3rd parties. For example, you had a Weaver VO-1000 (a Baldwin product) with EMD Geep sounds. Going to QSI gives Atlas a much wider range of sounds and DCC is a more widely used command system.

I agree Joe, provided Mr. Water uses T-shaped rail and not tubular rail. I don't think the 2 rail flange will stay on tubular rail.

Yup, you are correct. If he has tubular rail, he needs the deeper flanges of 3-rail wheelsets.

yeap, dc motors running on TMCC which can only run with AC current.

Hotwaters layout is all Atlas O..so he is fine with regards to that.