[ARealMothersSonForever]

it is stipulated that neither government will interpose any obstacle to the transit of persons and merchandise of both nations;

This also goes to the fact that passports are not required of USA and Mexican nationals. Mexico does not participate in the Visa Waiver Program. I think that is a bad thing, but it is how it is.

[conservative in nyc]

it is stipulated that neither government will interpose any obstacle to the transit of persons and merchandise of both nations;

On the railroad. Not anywhere else along the border.

This also goes to the fact that passports are not required of USA and Mexican nationals.

No it doesn't. It says that US citizens transiting the railroad THROUGH Mexico to another country don't need a passport. It makes no mention of passport requirements for Mexican nationals visiting the U.S. or U.S. citizens taking the railroad to Mexico. Currently, Mexican nationals need a passport AND visa to visit the U.S. (or a border crossing card to cross into certain designated border zones to go shopping).

Your interpretation of the treaty flies in the face of current actual practice, which makes me believe it's not correct.