OK guys - thanks for your time and all the input.
Here's my takeaway from this and PLEASE correct me if I'm mistaken:
• Any more modern transformer(s) other than my older ZWs will not provide any further engine protection, even considering I upgraded the ZW's diodes.
Not exactly. Any relativly new transformer, say one produced in the last 20 years (z4000, z1000, etc.) has a much better and faster breaker than the post war transformers. "Upgrading" to any of these will help protect your layout and engines from some damage that can be caused by shorts such as melting feeder wires or the wiring connecting pick-up rollers inside the engines. It's not 100% protection for these things, but it is much better than running a post war transformer with no added components.
• The only advantage of a Z1000 or Z4000 over a ZW is a whistle and bell button
The z4k offers additional functionality for Protosound(1) engines which makes it much easier to access the features of these engines. You can find more info about that starting on page 6 of the z4000's manual. From a practical stand point the z4k is a very good transformer if you have PS1 engines and wish to use their advanced features often on a conventional layout.
The z1000, on the other hand is a poor choice for Protosound(1) engines. It is fine for almost all other O-gauge trains, but the form of the output signal from this transformer is misinterpreted by PS1 engines and will not allow them out of the reset state in most cases. There are many other transformers that have this issue as well. You can search the forum for many threads discussing so called "chopped wave form transformers" Any chopped wave transformer will have issues with most PS1 engines.
• Once a short occurs, regardless of any protection, the surge/short inevitably reaches the engine.
Not exactly true. Electricity typically follows the path of least resistance. Often this can be through an engine's circuits, but not necessarily. Note that it's resistance, not necessarily physical distance. This is why it is useful to have many TVS on your layout, think of them as short cuts for the spikes to take, if the spike hits a TVS it will be drained there rather than continuing to your expensive locomotive.
• Additional inline protection might assist the transformer to trip faster than the transformer's circuit breaker.
Additional circuit breakers should be used to, more or less, replace the transformer's circuit breaker. If the transformer's breaker trips, the additional breakers are doing nothing at all to help you. Instead additional breakers should be sized to the lowest current rating that will allow your most demanding train to run. Thermal breakers, some good choices are linked by others above, will provide a reasonably quick response that should protect the wires from melting in your engines. Sizing these in the 5 to 8 amp range is probably most useful for most people.
• An inline circuit breaker is better than a fuse.
Only in that it is resettable. It is a one time cost and is quick and easy to reset. In the long run breakers are certainly less expensive and less hassle. There are many different types of circuit breakers, but the ones commonly talked about here (Thermal breakers) do not offer any better protection than a fast blow fuse. Magnetic or electronic breakers work much faster when there is a short than thermal breakers, but are also much more expensive. Electronic breakers may protect the electronics in your engines better than thermal breakers.
• Inline protection protects the transformer and not the equipment
Additional circuit breakers of a lower rating serve to protect your equipment. The breaker inside the transformer is there to protect the transformer from damage. you add breakers to protect your layout and trains.
So - I'm wondering what the point is for additional protection.
As stated above, the breaker in a transformer's primary purpose is to protect the transformer from damage. On most newer transformers they will only offer marginal protection to your trains, only helping prevent the damage from serious short circuits. Post-war transformer breakers won't even do this, offering no protection to your trains or layout at all.
Adding TVS (transient voltage suppressors) to you layout provides protection from voltage spiles that can damage the electronics in modern engines. You may get away without them without any harm to your engines, but with them being so inexpensive, there is no point in taking chances. TVS are there to protect the sensitive electronics in modern engines.
Adding circuit breakers provide protection to you layout, engines and lighted cars by cutting power if there is a short circuit that would otherwise damage them, such as from a derailment.
There are many options for breakers. Inexpensive thermal breakers are a good firs step. If you are running relatively inexpensive equipment these are likely all you need. They will make sure you don't melt the wires in your stuff if you derail.
Electronic breakers offer a bit more protection as they can very quickly react to short circuits, and these will protect the electronics much better than thermal breakers since they trigger on a time scale where electronic components may not be damaged. You can buy stand alone adjustable electronic breakers, such as the PSX-AC, which by all accounts are a very good product, or if you use the Lionel PH-180, these transformers have a very good, though not adjustable, electronic breaker built in. I would recommend using electronic breakers if you are running expensive modern engines or equipment you can not afford to replace or repair.
In summary, if you already have post-war transformers, adding TVS throughout your layout, and 5 to 7 amp thermal breakers to each transformer output will provide adequate protection in most cases. If you need control of Protosound(1) engines, the Z4000 may be a good choice, but otherwise it doesn't offer much besides a bell button for other engines. (bell buttons cost like $20 from lionel, or you can make your own for a couple dollars.) If you are running a command control layout, Lionel's PH180 is the gold standard, and offers the most bang for your buck.
I know it's a lot of information, but hopefully it's useful.