Dennis at Zstuff will get your problem solved. Just a couple things while you are waiting. First, I have about 15 DZ2500 switch machines, all in TMCC mode, and I use the controller also - no problem. Second, as a check, make sure that both the controller's and DZ2500's red wires are connected to the same voltage source, and the controller's and DZ2500's black wires are connected to the same ground (I also believe that if you want the anti-derail feature of the DZ2500 to work, the ground should also connect to the track ground). Last, when you use the button on top of the DZ2500 to make the switch throw, do you just give it a quick press, or do you hold it down until the throw operation completes? I ask this because in my experience in throwing a DZ2500 and ending up with one of the LEDs flashing, it meant that the switch didn't fully throw. Holding the button down on the DZ2500 for the complete throw operation may remove some stress, allowing the throw completion, whereas, using the controller doesn't remove the stress.