I am posting on this old thread again as I have further knowledge to share in the hope others avoid these problems.
Things had been mostly trouble free except for one section that would intermittently decide to flicker, including one new section where I had added a sensor by cutting the rail.
I found that where I cut the rail was causing a flickering sensor because there was a tiny flap of metal below the rail where the cut had been made.
It wasn't too hard to identify and remove the small metal shard which resolved the problem completely.
It made me think that these problems must always be caused by a high resistance contact between S88 section/rail and the power rail underneath the track.
They flicker because of the AC current which only returns occupancy for one half and they are intermittent due to the high resistance - which is too high to cause a short but can cause detection because S88 is so sensitive.
I had a track section which had been playing up very rarely over the last few months and was unable to completely resolve it, because I had been working on the end rail connection thinking the problem was there (which wasn't the cause) but the movement of the track when working was enough to sometimes 'fix' the S88 detection for a period of time.
After my realisation with the new sensor and the cut track I decided to pull this whole track piece out (not easy) and inspect it. Cleaned the solder joins and what not.
I then found a chunk of something, perhaps rail plastic, that was stuck in the gap between the rail and the power rail below. Removing it resolved the problem.
As it happens I then had two other sections last weekend also flickering again. One piece of track I removed but could not find a clear cause for flicking. I removed the rail from the track (2205 flex) and cleaned everything. Fixed.
Last flicking sensor was a very short section as it was a single curve track piece (2231). This one I could not resolve with cleaning and unlike 2205 flex tracks, you can't easily remove the rail from a 2231.
I didn't give up though and decided to cut the power rail underneath the rail where the solder join to the S88 rail was located as it seemed the most likely location of the problem.
Since the power rail runs both sides of the track, you can actually cut one side off and it will still feed the centre studs.
As it happens I found more of this plastic/rust gunk below my solder join:

However unlike the previous track piece, cleaning that stuff out from below the rail did not resolve the problem! The power rail had been cut regardless, so it couldn't be the cause anymore (or not the only cause).
With no other option left, I decided to remove one side of the power rail from the entire piece of 2231 track - that is the piece below the S88 rail but also leaving the two end pieces intact as they hold the connection tabs.
After cutting away the power rail I could see absolutely nothing that could be causing the flickering, however with it removed the flickering stopped as expected.
The end sleepers where the track connection tabs are located are solid plastic and don't have a gap, so no way the high resistance join could be there.
I know in this discussion people have had success with opto isolated S88 modules. Without really knowing their differences I am guessing that it separates the S88 from the power feed earth and so isolates S88 from power that causes the flickering.
What I am saying is that this issue does have a cause and that cause is high resistance between S88 rail and the power rail below the track.
Unfortunately every sleeper except the end two has a big gap between the rail and the power rail below, so there are so many places where the high resistance leak can cause false S88 detection - which can make it an absolute PIA to fix.
If Marklin had made the plastic sleeper frame a solid piece (with no gap) then I suspect a lot of these issues would never have occurred.
Of course K track was never designed with S88 in mind back in the day. Not sure about C track but I don't believe it has this issue with the solid roadbed, so this problem typically only affects K track users.