3 cab light blinks is an indication of a defective smoke unit fan motor. The "locomotive diagnostics" briefly tests the fan fan the loco is first powered up. If to much power draw by the fan either when tested or when the locomotive is operating with the smoke unit on, it will shutdown and the cab light will blink.
If its just a temporary glitch a reset will get it working again, if it still senses too much draw it will shutdown again. Three resets and another shutdown will shut the smoke unit down permanently unless power is removed for several minutes.
Lionel had a "rash' of defective smoke unit fan motors when these mikados were released,other models released around the same time like the k4's and atlantics also have had problems.
If it continues to shut down and blink the only way to correct it is to replace it with a new fan motor. once replaced the diagnostics will reset with the lack of power draw and it will work fine.
I had the same problem with a legacy k4, fan was noisy out of the box, just before the end of the warranty it quit altogether. I decided to repair it myself as a new fan motor was far cheaper than return shipping. The new fan motor is whisper quiet and all is well.