Ray,
I haven't done the Lionel SD40, but I have done the SD45, which I think has the same "kinematic" pilot set up. The good news is with that is the pilot is already mounted to the frame, so it doesn't have to be detached from the truck to be frame-mounted. The bad news is it moves and there's still the same gap between frame and pilot one sees with good ole fashioned flippy-floppy pilots. Compared to more traditional three-rail diesel set ups, though, it's simpler. The pilot is already mounted on the frame and the coupler is mounted to the pilot. So there's no need to mess with things factory-mounted to the trucks.
I checked the frame for any oil or grease, cleaned it away and then just applied some glue between the mount and the frame to center the pilot in place. Then I reinforced it by gluing in some styrene strips to keep the pilot from moving. After that I cut plastic strips to fill in the gap between the pilot and the frame. This required some trimming and filing and test fitting. Then paint and glue in place.
With the SD45 Lionel supplies pads to install Kadee couplers, but I didn't like the mount--the couplers protruded too far out from the pilot. So I made my own mounting pads from strip styrene, painted and glued in place. I also used styrene to fill in the pilot around the coupler and pads. Obviously one has to remove the factory three rail coupler. As Jeff says, the full handrails are the finishing touch.
I've done an Atlas GP35. The gold standard for converting Atlas engines for me is using the parts Atlas uses on the factory two-rail models. And that's how I've done most of my fleet. But the two-rail pilots for the GP35s have been out of stock a long time and were out of stock years ago when I did mine. So improvised using a filler part Atlas uses for the two-rail SD35s. (Mario wasn't around designing conversion parts available on Shapeways back then). It wasn't perfect, but it's much better than the floating pilot. (I've since managed to acquire a two-rail pilot part I plan to use for a second GP35 model that's been waiting years for the conversion). If Mario has done a filler for the GP35, you can use that. Otherwise the SD35 spacer can be made to work.
You'll need to remove the factory three rail pilot, cut off the mounting tab, measure where to drill mounting holes (it doesn't have to be perfect) and drill. You may have to tap the mounting holes in the die cast frame. I don't remember the size, but in my experience, Atlas usually uses 2.5 mm screws to mount pilots. Micromark sells an inexpensive tap wrench. See if there's a parts chart on the Atlas site for the GP35 in two-rail and you can see what size screws are needed. After mounting the pilot I made coupler pads to mount the couplers and glued them in and painted to match.
RM
