Why is DCS doing this to my ps-1 loco

You are experiencing the difference between a chopped sine wave supply and a pure sine wave supply and the PS/1 electronics.  The fix is not to run through the TIU for variable voltage for this unit.

I suggest looking into Z4K tracks and running through the fixed channel with the Z4000 controlling the voltage with the transformer.  You'll need a Z4000 remote control receiver, but it'll solve the problem.

Do you have a lighted car on the same track with the locomotive?

Yes I do have lighted passenger cars on the track as well.

After playing around and trying other PS-1 locos I have noticed that the horn issue only occurs when I turn on the smoke units. With smoke units off all seems well. So if I am going to use smoke units I have to watch how low I go with the voltage on the track. If I get it too low the horn will blow. As I said in the original post, the low voltage causing the horn to blow is not happening when using the z4000 handles to control the loco.

 So is it the smoke units that do not like the "chopped sine wave"? Can someone explain why this is happening. Is there a fix for this so I can run as slow as I want with smoke turned on and using a variable tiu input?  Thank you for any input

One potential fix is to use a larger non-polarized cap across the pickups of the engine in question.  You can also try it on the TIU feed to the track, noting that it will screw up DCS operation, so you'd probably have to make it switchable.  I managed to tame a PS/1 by doing that, but I don't know if it's a universal fix.

Try lowering the input voltage to the VARIABLE channel of the TIU to, say 14 volts or so..  This will alter the AC wave and may solve the issue.