On my layout, I have a Ross 106 LH which leads away from the main oval. As such, the "interior" rail leading to the frog from the straight section is the grounded rail as it is the outer rail of the main circle. So, in order to set that switch up for non-derailing, do I just isolate the "outer" rail of the straight section of the switch? I won't cut the switch, but a short piece of track right before the switch.
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A short section will work fine. Just make sure it is far enough in front of the switch so that the switch machine can move the points all the way before the train gets there.
Ok, I got that. But am I right on reversing the insulated section to the opposite rail as the grounded rail is on the "inside" of the Y?
Most of the time I have seen this method done, it is the "inside of the Y" rail that is broken. Really it doesn't matter which rail you break, just so that one is broke, and the other is still "Base" or "Ground". Your train is acting as part of the connection( it completes the circuit) when it goes over that section of track. Just like if you are pushing the Switch machine controls.
Try and keep the long continuous rail outside for power whether the switch is lined for either route. That would mean drops to both outside rails for power and then think about the non-derailing feature using the other shorter rails. With traction tires outside rail pick up can be a problem