I think bulldozer mode requires a FARL at each end of the train.
Yes it does, and I did that. And there was a cargo car with rails in it. What I think is happening is bulldozer mode does the following;

Remove entities other than rails in front of the FARL.
Place rails in front of the FARL.
Remove ...

I'm trying to use bulldozer mode to tear up an old rail line, but it keeps deactivating because it "can't place rail". Is there a way to use the FARL for this? If not, maybe a distinct "Demolition" mode could be added?

Also, I think it would be great if the FARL could detect ghost tracks, and be ...