I'm going to assume that the train set was a DC set and not DCC. 

That being said, you connect the green wire to the rectangular switch.  The switches (as you said) can be connected together.  The red, two wire, cable connects to the male side of the rectangular switch.  The other end connects to the AC connection on your controller.  Don't connect it to the DC/track connector, but to the AC/accessory connector.

Hope that helps.
Kevin

Please only post questions in one section of the board only.  That way there's not two identical topics.

See my response to your question in the HO section.

Kevin

The Bachmann auto-reversing trolley has all of the reversing circuitry in the "barn" that comes with the set.  The reversing track just allows the circuitry to continue.

If you're just looking to use auto-reversing for your existing trolley's, your best bet would be to get something from another manufacturer.  To use the Bachmann equipment, then you'll have to purchase the whole set.  I believe that there are several manufacturers that sell reversing units.  Some that you can even set up stops with delays.

Kevin