That’s OpSw 14, you have to close it for the SE8C to take commands from the Loconet. By default it reads the accessory turnout commands fromt he track feed, which is why track power needs to be turned on.
To use it standalone with a PR3 - it MIGHT work, you need to close OpSw 14, and put the PR3 in “MS100 mode” (I kinda wish they hadn;t called it that - it doesn;t really act like an MS100, it’s buffered like a Locobuffer) and also enable Loconet termination on the PR3 - also not a great term, as it isn’t ‘terminating’ anything like the terminating resistors from thinet ethernet days, it’s actually PROVIDING a current source for the Loconet. That will allow Loconet traffic without a DSC100 or other command station.
–Randy