The project is stalled by more than just a lack of funds. There is also a disagreement between NJT and the NYS&W. NJT wants to buy the property from the NYS&W, and NJT says they want too much for it. The NYS&W will not budge on their selling price, rumored to be in the area of 25-30 million. I dont know how much NJT is offering.
If they had the funding and equipment to start the project, I dont know if NJT would proceed without ownership of the railroad or not. Most likely there would be some type of signal system installed, as well as some sidings installed, if only to increase operational flexibilty. Otherwise, the service would wind up like the PVL, down in the morning, up at night.
Also, to be fair, the NYS&W has offered to NJT to operate the service on their own, if NJT would provide the funding. NJT has wisely refused, as the NYS&W proposal basically consisted of "give us the money and we will run some trains." From what I was told, their proposal did not cover exactly what equipment they would use for the trains, other than it would not be NJT equipment, also the service would operate from Sparta to an undetermined terminal, but would not run down the Main Line to Hoboken, as the NJT planed service would.
Proven Theory #2 - If you don't work for the railroad, you don't know more than the people who do, no matter how many years you've hung around the tracks, or how well you think you understand railroading.
Rest in peace Jtgshu.