Hay Rugsy,
One of the guy's in our group, The Raritan Valley Hi-Railers, has a K-Line K-4 Pacific which now runs great and a real looker to boot ( this response may address the signal issue). About a year ago, he was having issues with the loco and was getting really bugged with the problem. I have a DCS certification for repairs and I've dabble in Lionel issues, more of Lionel than DCS. Mostly I do it for the guy's in the group. I offered to take a look at the K-4, took it home, and for a half hour was trying to diagnose where the problem was. Here's what I discovered with it. K-Line uses the hand rails, just like Lionel's older models do. There are insulated grommits that go through the outside of the cab to the inside of the cab, to keep the handrails from touching the boiler body. All the stantions on the boiler are insulated, except the two in the center. The two in the center (one on each side) are metal connected to the handrail ( which is the antennae) and the stantion passes through a rubber grommit, with a wire attached on the inside, which goes to the antennae wire on the mother board. Might be wire nutted! I put an ohmeter on the handrail, after taking the shell off, then to the wire attached on the inside of the metal stantion and got some high resistance readings on both sides, plus the stantions seemed loose over the handrails. The only thing that could be done was to take a small file to the handrail and metal stantion so the surface would be clean for some soldering with 60/40 solder and dabbed a little Rosin paste on the filed joint prior to soldering. Prior to the repair the headlight blinked sporatically, which is a sign of a weak signal, but now stays on steady. Also you may want to take the same ohmeter and see if either handrail (check each one seperately) is grounding to the boiler body, if my suggestion doesn't reveal loose metal stantions.
I don't know if your model is similiar to the one that I repaired, but you have a head's up on where to look, if it is similiar. Happy to say that I've turned a sour puss into a happy camper.
Steam Forever
John