"I stand in a train."
I'm pretty sure it just depends on what the topic is supposed to be. In your sentence it would be, "In the train is where (I) wait" versus "電車でたちます" which would correspond with "(I) wait in the train" if I am correct.
I don't think this is a politeness issue. で indicates location, は is a topic marker.
Is there a reason tattemasu isn't accepted? I thought that since standing is an action that is ongoing it would work.
たっています is "be standing", so would make the sentence "I am standing in a train", not "I stand in a train".
Wouldn't that then translate as "I am standing in a train" instead of "I stand in a train"?
Yeah, I stand in a train is not inherantly present progressive in English. Changing it to "I am standing in a train" removes any ambiguity.
Why don't we use に here? I thought で was for "actions in a place"? "to stand" is considered as an action?
I'm pretty sure に should be accepted, see http://context.reverso.net/translation/english-japanese/stand+in