At that age and level of interest in trains, we'd (LHS) say a Lionel starter set. As others have said, they're made for play. If you're into the sixth or seventh decade of your life, you'll probably have some memories of receiving your first 'Lionel' around the age of 5.
However, there are two other aspects to making this leap.
First, how the child cares for their toys is a matter of parenting. Co-participation in the intial set-up, running, maintaining of the train...i.e., setting an example for the desired behavior...can go a long way towards ensuring survival of the investment. That said, kids will be kids, and I can remember some 'play' scenarios I had with my 1949 Scout set. However, being "rough" and being "abusive" are different, IMHO. Paint scratches, a broken coupler, a bent metal handrail, etc. are to be expected in extracting play-value from a set at that age. Running the engine/train at full throttle off of a table onto a concrete floor..with glee...resulting in diecast and plastic shrapnel everywhere is simply abusive. But, so is having the train gently played with for hours and hours and hours...but never once cleaning, lubing, oiling the mechanism.
In this case, since you are the uncle, what level of parental involvement would you expect from your brother/sister in giving your nephew a train of any type? Do they even know of your intentions? Did they 'yea' or 'nay'? Will they be involved in the child-train interaction at all?
A battery-powered train benefits the giver, but not necessarily the recipient. It will typically cost much less to purchase, but have far less durability, performance, expansion possibilities, and learning value. Our best example is the battery-powered version of the wooden Thomas trains. I can't tell you how many parents bring the battery-powered Thomas, James, Percy....whatever...back to the store complaining about it because it's upsetting and disappointing junior. He wants it to do the same thing his push-Thomas does: Pull several cars up steep climbs and around sharp curves. It doesn't, of course. It was never intended to do so. So the B/P-Thomas is given lots of manual assistance (mechanism abuse), the child is unhappy and loses interest in the train-thing.
Which leads to the second...and perhaps most important...consideration. Do you want this purchase to meet the skills and interests of the child for NOW, the day of the gift-giving, or do you want an investment in a toy that will challenge, inspire, and educate, helping them to grow? If you already expect this to be another 'disposable' toy gift, find a cheap battery-powered plastic train, plastic track package at a big-box store and be done with it. If you already have conceded the child to the immense play-value () of sitting in a chair staring at animation on a screen, then buy him/her a Train Simulator for the computer...they can handle that at the age of 5, believe me.
But, if you want to give them a toy that will develop skills and responsibility, challenge their creativity and imagination, and help them grow in the next 365 days until the same gift-giving opportunity arises, by all means think seriously about a Lionel (or MTH) starter set.
Just MHO, of course.
KD