I just wanted to let you know that I do not run any modern trains on my layout, so I cannot speak to the effects of the circuit on modern locomotives. Everything I run is postwar. Yes, I believe I installed the capacitor to stop the relay chatter. I have had two of these in place on two different loops for at least 2 or 3 years and I have had no problems whatsoever.
The defeat swx is nice. For example, my Uncle and I set up a 4x8 layout every year at his house and I bring up whatever Lionel trains he wants. He received some of our Lionel trains as a child. I always take the Sante Fe passenger train and that is one of two trains I run on my outside loop. Now all I have to do is flip the swx on the circuit and the other train does not get stopped by the block and runs continuously.
Hope this helps or clarifies things.
Merry Christmas!!
Mike