'When you have eliminated the possible, all you are left with is the impossible' or so Sherlock Holmes is claimed to have said.
Your circuit should work, so its impossible. Except that in electrical circuits there is usually a fault or a mistake if things don't work.
Quite clearly your indicator lights are being powered by both supplies. There must be an unintended connection somewhere. It could be within the power supplies (unlikely but possible), or in the internal connections of the switches, or the way the other switches are connected together. Or something else!
It should not be necessary to connect relays to make the circuit work. Since there is something wrong with the circuit, there is no certainty that adding relays will resolve everything. There is a small but serious risk of fire if there is a fault.
The simplest way to resolve this is with a multimeter. If you don't have one, and cannot borrow one, it may be cheaper to purchase a basic meter. Maplin have a basic model for just less than £10.
The first thing I would check is that the outputs of the power supplies are actually 'floating'. Measure between earth and each terminal with nothing else connected. The actual voltage will depend on 'stray' resistance but a zero reading would indicate that there is an internal connection to earth. I would expect a similar reading from each terminal.
I am a bit dubious about your rocker switches. Mains rated switch with 12V indicator? It depends how you connect them, but that sounds like it could contravene safety regulations. Are you absolutely sure that you have correctly identified the connections, and that the internal connections are as you have shown? As Gizzy mentioned, what make and part number?
And finally how have you connected the other switches and track sections? Disconnect all switches and track sections and then try connecting one, test for correct operation, then add the next switch and track section. And so on.
Sorry that this is not a clear simple answer, but you have not asked a clear simple question!
In the news this week a care worker used a manual key to open a lift door, pulled a wheelchair into the empty lift shaft and fell seriously injuring herself and killing the patient. It was 'well known' that there was a problem with the lift. Its a lot less dramatic, but if you have an electrical fault that is not understood, you risk a serious fire.