Unfortunately, Rapido has started using ESU designed motherboards which limits lighting functions that can be used by other decoders. I have a workaround that SHOULD fix this for the LM-3@-21, but I haven't tested it yet so won't post it here as it may damage components if not done properly. This shouldn't change the front lights though, as the front and rear lights should be accessible from any decoder/module. Did you set the front light button to "Output 1 Front Light"?
I am getting my Rapido CF-7 today actually (With ESU so I can do some cross referencing), so I may do some testing and let you know how my workaround actually functions. It will involve some surgery, but nothing super complicated.
ETA: The E8 doesn't have the factory capacitors, so I think it might work 100% with a LM-3S-21. Can you post a picture of the internals of the locomotive showing the motherboard? I have an E8A from an earlier run and can do some comparisons to see if they are the same.