Hi Mike,
What isolation means is that current (track power) cannot flow to the motor or lights without going through the LM. In the olden days (and it's still prevalent as manufactures don't always update older models when doing re-runs) much of the time the chassis / frame on the locomotive was basically an electrical bus bar, the pickups on one side of the locomotive were connected directly to the frame and one side of the motor and lights (terminals that is) were connected to the frame as well. Athearn models from the blue box era were a good example of this system.
As your model has a wooden floor it's highly likely the motor and lights are isolated from the frame; wood is a very poor conductor of electricity.
If your still unsure, you can post us a photo of the models internals and we'll see if we can see anything different of potential pitfall.
- Tim