Hi
I had the same issue I used surface dock all the time, before I had surface pro3 with old dock for almost 7 years and always use a bigger monitor as an extension. Last week changed my surface to 7 and bought the new dock as the old one was not compatible. Yesterday setup everything and seems fine the problem started when I plugged external display cable to USB-C. I bought USB-C to HDMI cable tested it in the shop with surface it works fine, but when it is connected to Dock 2 it did not work.
My Solution, I bought a USB-C to HDMI adapter, and it works fine. (Connected HDMI cable to USB-C Adapter)
https://www.ugreen.com/products/usb-c-to-hdmi-adapter
So, I believe the issue is with the cable, change the cable and see if it works,
Hope it works for you.
Saeed