Thanks SP. I found the problem through a long trial and error process which I'll spare you the details unless you really want them. It turns out that the short was in the loco, not the tender nor its PCB.
This photo shows another PCB that is in the loco. It serves as sort of a "hub" for wires coming from the tender and going out to the motor, headlight, etc. Two of the wires on this PCB were reversed: One of the wires was for track pickup (black), and one was a motor lead (yellow). This means that one of the track pickups was given a direct connection to the motor. If you look at the photo, the wires with the yellow and blue splotches on them are the motor leads. Looking at the solder pads on either side of the PCB's mounting hole, the blue wire is on the inside pad (correct), but the yellow is on the outside pad (incorrect). This board is symmetrical, electrically speaking, so yellow and blue leads should be on the inside pads, red and black on the outside. You can even visually trace the PCB's red track pickup wire (going to the connector just below the x-acto blade) and follow the circuit to the pad with the yellow wire. Come to think of it, it looks like the red/black wires are reversed, but that's not the case.
Anyway, this perfectly explains the weird behavior between DC and DCC operation. In DC, the direct connection to the motor from the track didn't cause any issues because it is DC power, the wire was from the correct side of the track, and since the throttle on the transformer controls speed, all appeared normal under DC. Switch to DCC, now you've got AC power going through the rails, and with one of those rails delivering AC power directly to the motor, we've got a problem.
I switched up the yellow and black wires on the circuit board, plugged in the decoder and it works perfectly. Then began the loooooong reassembly process (loco in pieces, tender in pieces) after a much longer disassembly/troubleshooting process. If this loco wasn't several years old, I'd have given up long ago and sent it back.
VCDave, I know Athearn made an FEF-2 and 3, but I'm not familiar with the 4. If it's the same as the FEF-3 and you think you might have the same issue, I can walk you through the disassembly process unless you already have the know-how.