Trainz can be installed in any drive and Raildriver can be made to work with it. It's a long time ago but I seem to remember that I had some problems in early versions. I've had Raildriver working in every version from TRS2004 through TS2009, even on multiple versions on the same machine.
Do you have the latest drivers from PI Engineering?
www.raildriver.com/support/downloads.php
When you say only some controls work can you be more specific.
a. Do the Buttons work?
b. Are you in DCC mode as only some of the controls are active in this mode?
c. Do the horn, bell and lights work?
d. Have you set it up using the calibrator?