Insulated Rail Measuring 2.5 Volts

Just to be sure, if you are using a DVM, is it autoranging to the lowest setting and you are actually reading 1.8mv?  I am unfamiliar with what you dremeled out of the turnout to isolate a rail, but why did you start there, and not just that first piece of sectional track attached to the turnout?  Sometimes the track will move or expand in warm weather to close a gap between rails you wanted isolated and you need a plastic spacer to keep them apart or an insulating pin with a shoulder as used in the Lionel O turnouts.   Most modern DVM's and some older VOM's have a sufficient input resistance that even the slightest leakage in a circuit will read on the meter, but any load will make voltage go to zero as it is being read through a very high resistance.   Put a lighted car on the isolated section and see if you still see that 1.8 volts or if under the lamp load it goes away.  If it does, then it is a high resistance leak that may not be an issue.  If you jam your test leads into the plastic ties, do you get any reading at all on your meters highest ohm range?  This would have to be in the megohm setting.  Is there oil or water or spilled coffee in and around the track?

Perfectly normal, you need a load or stray capacitance will give you voltage readings with a high impedance input meter.  Remember, an insulated track by it's nature is floating without any power connection.

Thank you guys! I do not understand why I am getting a reading of 2.8V on my multimeter, but I am happy to know I can put everything back together!