Someone did / was going to do this type of install for a trackmobile. Yes you can do it but there is a few things to know:
1. The locomotive will essentially be a plain old DC loco, so you can't run it anywhere else on the layout; unless you want it to take off as an uncontrollable rocket that is. You also can't use it on any DCC powered track.
2. As you've already noted the section of track has to be isolated from the rest of the layout.
3. Lighting will be the same as a plain old DC loco, ie directional. You won't be able to use RP's lighting.
4. Power shouldn't be a problem as long if the track length isn't too long (it's PWM so it's still ~14 volts). If the track length is fairly long you'll want to have the LM powering a track bus with droppers like for any other track.
The easiest way to think of it is as a microprocessor controlled plain old DC system; instead of an old variable voltage throttle sitting between the power supply and the track it's an LM instead.
- Tim