... the incandescent recessed lights in a hallway started flickering & flashing on and off. Those lights (two 65w bulbs) are controlled by button 1 (internal dimmer) on a 2486D Keypadlinc. ...
I had a similar thing happen to me, with lights controlled by an older pre-insteon SmartHome ToggleLinc dimmer. I went to turn it on, and they just started to strobe. And the air gap was the only way to stop it - but as soon as I pushed it back in, they started strobing again. Since I have *never* (in the 12 years since we added those lights) needed to control them using X10 - or even dim them, I just replaced the bad switch with a standard toggle (dumb) toggle switch.
I suspect that it was a failed capacitor, as I've had a number of other capacitors fail in the Smarthome switches over the years (I've repaired two or three Insteon Togglelink relay switches so far, with others in the box, waiting for me to have time to fix them). I also had an older (pre-insteon) Togglelinc switch that had failed a few years earlier. I don't think I ever bothered to open that one up to diagnose it, since it was being used in conjunction with a companion switch, and both got swapped out for Insteon relay switches.