Use a toothpick to clean the groove in between the copper segments. One drop of oil, or a very tiny dab of grease on the protruding armature shaft is the only lubrication required in this area. Some people think more is better, but it's not. If oil or grease gets on the copper segments it will arc (spark) and burn, eventually ruining the commutator. If the commutator is very heavily pitted, you could try resurfacing it with fine sandpaper.
It's rare but possible for one of the armature windings to fail. If the armature or commutator is shorted, the loco will operate erratically and I suppose it could run hot and smoke. New old stock replacement commutators/armatures are available for a Wabash 2337 and repair is pretty straightforward. There are even folks who could rewind yours to as-new condition. -Ted