William, the sound module should come out OK. 
I don't know what country you are from but maybe someone there can help you get it running.
Sure would be cheaper than sending it back.

Ben,
As said before, make sure your locomotive is operating.  You could insert a small piece of wire into each socket on the clip from the controller and touch those to the wheels.  That way you're not damaging anything.

Here's the MRC Sound Station with all the sounds http://www.ebay.com/itm/Mrc-Railroad-Sound-Station-312-/321915772066?hash=item4af3acdca2:g:C5EAAOSwAYtWP9OT

I have a MRC Symphony 77 sound system that I use with my Xmas display.  It does exactly what you want and was priced cheap enough.
BUT, it is no longer manufactured.  They do come up on e-bay but none there right now.  It can be added to your layout at anytime so keep a lookout for one on e-bay or maybe one of the model RR forums on Facebook.

Look through this volume of Troels Kirk's On30 layout. http://www.railroad-line.com/forum/topic.asp?TOPIC_ID=36954
He used HO track and for me it looks just fine. 
I use HO also to save costs and it works for me too.

Yes they will, but if you're buying Kadees get the #148.  Same as #5 but have whisker springs. Much easier to assemble than #5.

take the engine to a local hardware store and check in the O-ring section to see if you can find a rubber o-ring to fit the wheel

The best "adhesive" latex caulk (washable off your fingers) is Pheonsil, a DAP product at HD and Lowes.  Will NOT eat the foam and sticks to anything.....forever; but can be separated later with just a putty knife.
Used it for years in my construction business.

Like Steve, take a look (listen) to the TCS WOW decoder.   A real big difference.

William,
If your layout runs well on DC and all the proper blocks are working then converting to DCC should be easy.  No re-wiring required.
I would also look at some of the more advanced DCC systems.  You may find that the EZ Command is just too basic and limited controls for your liking.  Look for a used system on e-bay where someone has upgraded to the newest and is selling of their perfectly good used system.  Definitely look at the Bachmann Dynamis as well as NCE (my preference).

Hawk, I think the PofP would have worked but the sculptamold should do fine.  Caulk would also work as all your trying to do is attach the bark to the already formed hill/mountain (not making a mold).
Good luck as this is a good technique.

Or consider a MRC Symphony 77.  Although no longer made it does give basic sounds with speakers under the layout.
http://www.ebay.com/itm/MRC-Symphony-77-Stationery-Train-Sound-System-AA555-/261899640704
These sold for around $70 new so shop around before you buy.

Never done it, BUT this is the forum to go to for all dead rail info: http://www.freerails.com/view_forum.php?id=45

I'm smiling  .  Those were just guesses but they are the things I would have screwed up hence the suggestion.
Glad it's running with sound now.

Just a couple of thoughts.  Is it possible that the pins are in backwards?  I've never done one of these so just a guess.
Or is it possible that you DCC controller has the sound muted?  You do have a speaker installed....right?