Joe:
If I remember correctly from my own experience; if the locomotive stops and the front lights start blinking it means you have issues with the signal from the top track mixing in with the signal from the lower track. It is not really a loss of signal but too much signal. The locomotive on the lower track receives too much info too fast (I think it is frequency related) and decides to shut down. This is what the ground wire fixes.
The ground wire stops the signal on the top track from propagating below it and mixing with the signal from the lower track. I first read about the issue in an OGR article written by the NJ Hi Railers. They solved the problem with copper foil underneath their scenery. I used aluminum foil under mine. It sounds like it is too late for you to go this way so best thing to do is run a wire under the top track (does not need to be bare wire) and connect to an independent ground (not track ground if I remember correctly). I don't know how your top level track is laid (roadbed, ballast, elevated structure etc), however the wire does not need to go directly under the track just underneath it somewhere.
I don't know if wire needs to be on both sides of the track or one side only. I will let the experts answer this. Since the signal radiates out in a circular pattern one would think one wire is enough.
You can also do a search of the Lionel YouTube videos. There is one where the problem and solutions are discussed.
Let us know how you make out.
Joe