Hi John,
First of all, welcome to the world of computer driven layout !
I strongly suggest you to read the beginning of the thread
https://www.marklin-user...ftware---Tips-and-tricksand especially the post #2 which describes the basic concepts.
Apart that, most of important answers have already been written by other members in the posts above.
I'm going to try to bring some complements and/or explain things from my point of view...
What is the purpose of a computer driven layout ?-To allow
SAFE and
COMPLEX automation of
MANY trains, much more than your mind can handle and much much more than the ridiculous features provided natively by the CS2 (it's my opinion). Don't get me wrong: the word "ridiculous" refers to the set of features supported by the CS2 in terms of automation, not to the people trying to use them to achieve acceptable automation...
-To allow
manual management of trains
NOT already driven automatically, i.e. provide interactive play with some locos which are not under running automation: manage sidings interaction, manage a steam depot, prepare trains for running, insert them into a planned traffic, etc... The possibilities are close to the infinite !
-Be astonished

while the course of some trains is chosen at random by the software when running in automatic mode, and depending on the available free routes
-Create schedules (one time or recurrent) of trains running thru various locations of your layout, and run them
-Create animations of some scenes of your layout while trains arrive is special locations
-and many more...
What is not the purpose of a computer driven layout ?-To interact
ONLY thru your PC screen and click on some turnouts and/or signals and/or click on sliders to increase/decrease the speed of some locos, and always stay in manual mode. I think you can get quickly disappointed, as the number of things you have to manage at the same time may increase rapidly, and thus creates a major disaster ! The only gain of such an approach is a total rejection of the computer driven approach. The manual mode must be a complement of the automatic mode, and/or a way of testing things while setting up the computer control.
A word of caution: Interacting thru a mouse and a screen on your PC with your layout is different than interacting with a hardware Central Station. Some people like it, some people really dislike it. You'll have to choose your camp after a reasonable amount of test time.
What do I need to start ?-As already said, a simple test layout to learn the basic concepts and discover how things run. Please,
NEVER start on your definitive layout if your don't master the basic concepts. This simple test layout must implements the main basic concept, i.e. blocks, complemented by feedback occupation information of each block. Then routes (oriented segment of travel from one block to another) are implemented. This provides you the mandatory things to allow automatic traffic. Please note that a block
without any feedback information is... nothing !
-A software like TrainController, iTrain, WinDigipet, Rocrail, JMRI...
-Digitized locos. Analog locs are not manageable by a software.
-Digitized turnouts (K83/M83 or equivalent driven turnouts). Analog turnouts are not manageable by a software.
Do I need brake modules ?-For automatic mode, as already replied, NO. The computer does the job.
-For sections of the layout where blocks are not implemented, thus not eligible for automated traffic, it's up to you...
Do I need to implement signals at the end of the blocks ?-For the general rendering aspect, yes !
Do I need to cut off power in sections before signals ?-For automatic mode, as already replied, NO. The computer does the job.
-For sections of the layout where blocks are not implemented, thus not eligible for automated traffic, it's up to you...
What is the best software ?It depends on many things. There are commercial software you must pay for any feature to be available. There are free software/open source software you can use with almost the same features and the quality of a commercial software.
Check first the quality of the documentation, the help available thru various communities (forum, online help, software editor...), the speed of implementation of new features, the richness of features, the robustness of the software, the cost, etc...
As already said, learn first the concepts - they are all the same in the various software, only the implementation may differ, then try to quickly implement them on the test layout. Some commercial software allows a test period without paying, with all features (or limited features) enabled.
Comparing the various software would need a dedicated thread and a lot of time.
Back now to more specific questions you asked for...Sensors (feedback information) should use middle track or external tracks ?It depends on :
-Type of track used : For K & C track, use of contact tracks (K-2295 for instance or Peco SL11 insulators) is generally the preferred choice. It corresponds to "external tracks" and use of the standard family of S88 devices (6088, LDT RM-88-N, Viessmann 5217...). I do not recommend the use of other devices like reeds/magnets (difficult to adjust precisely and all loks should have a magnet) or momentary contacts triggered by a pickup shoe (not reliable) like K 2299. For M tracks, if you can't find contact tracks section, the alternative is to use "current consumption detection devices" (a loco is present is a section equipped with such feedback devices), like Viessmann 5233, LDT RM-GB-8-N, or Marklin S88-DC feedback module - 60882. It corresponds to "middle track". You may also mix on the same layout traditional S88 detection and current consumption detection.
-Pros and cons of traditional S88 detection (ground detection) versus current consumption detection:
* "Traditional" pros:
.. Very easy to implement in a Marklin world (K & C)
.. Cheap
.. Reliable
.. Allow occupancy detection of lost wagons/coaches inside blocks
.. Any axle establishing the flow of ground potential is detected between the 2 external rails
.. The size of the detected zone is not limited on plain tracks (do not use on turnouts)
* "Traditional" cons:
.. one of the 2 external rails (the one which is insulated between 2 K2295 or 2 Peco-SL11) is not permanently linked to ground, thus allowing less conductivity and possible problems. This can be correctly cured by the 'diode trick' (See Ross Web site)
.. an already installed layout is not very easy to modify. This can be solved by cutting one of the two rails with a dremel or similar tool
.. for K track, you need to solder a wire, in the insulated section, on a rail (difficult and risk of melting tracks), or use of K 7500 plug (not beautiful, but there is a workaround)
.. may need more ground plugs outside of the insulated sections
* "Current consumption detection" pros:
.. Soldering on the central conductor is easier than on external rail (K-track)
.. Keep the 2 external rails to ground potential
.. Cases when ground detection is not adapted (when a loco is on a turnout, for instance)
* "Current consumption detection" cons:
.. sections of central conductor must be insulated
.. only a device consuming current (i.e. a loco decoder or a light in a coach) can be detected.
.. no lost wagon/coach detection is possible
-Other devices: infrared detection devices, RFID detection devices (see LDT web site)...
-Already owned devices: I know you have experimented optical sensors detecting the passage of a slider ("middle track" like). If the output signal can be inserted in the S88 feedback module, then you can easily reuse them.
-Ease/difficulty of modification of existing layout to set up the sensors (see pros & cons above)
A consequence of using feedback modules is you need to implement the S88 bus, either thru the native connection to the CS/Ecos, or thru LDT HSI-88 devices connected to the PC. In all cases, you are limited to a total of 496 feedback contacts. This is quite an important number, but your layout is very big.
An other consequence of using a PC driven layout is you need to setup a small PC network allowing the CS2 and the PC to communicate together.
Fade in/fade out signal modules reuse.To be honest, I don't know a lot. I personally use Viessmann 472X light signal series with Viessmann 5229 signal decoders, and the fade in/out feature is provided by the 5229. The only thing I'm thinking about is LDT LS-DEC family of hardware signal decoders. I know if you plug in such a decoder a Viessmann light signal of 401x family, you'll be able to get such a feature... but LDT signal decoders are not that cheap...
Other members may provide more useful information on this topic...
A word of conclusion.Computer driven layout is a huge world which provides fantastic possibilities.
In my opinion, everybody can succeed in such a world and have a lot of pleasure.
But, first you have to master the concepts and the implementation of these concepts in the software.
Be warned that such a software is a complex tool. It's NOT only a point & click affair.
The things you have to keep is mind are:
-Go each step after each other; take the necessary time.
-Learn something, then test it immediately on the test layout
-Be assisted by a friend who already knows the stuff and/or ask for help in the forum. Some members already know some sophisticated software and may provide help to you. Also use the dedicated forum of the software you have chosen. You will find many information and valuable answers
-Decide if you have pleasure while using a software, before going to modify your layout.
Cheers
Fabrice