how to remove the pinion gear

If I install any rails other the inner rail  it will cause the wheels not to  move by hand.  

What are "rails"? Do you mean the side rods? If the wheels turn without them, but won't turn with them in place, that normally means the wheels are out of quarter.

Before you do anything else, I suggest making certain the pinion gear is bad.

I do not find it surprising that the wheels become harder to turn when you engage the armature pinion gear. More resistance is normal. You have a large gear turning a small gear, which means it is turning faster. Plus that small gear is turning a relatively heavy mass.
Inspect the gear and clean all the lint out between the teeth. The lint usually gets packed in there quite well.
Make certain the armature bearings are lubricated.

Note: the 2036-110 armature bearing plate (pinion side) can wear out, and might need replacing.

To answer your question:

Lionel recommended splitting the old pinion gear with a pair of heavy diagonal cutters to get it off.
Today there are pinion removal tools available. I don't know how well they work.

The new pinion is pressed on.

If I had to do this job, I would not try it with the armature in the motor. If I recall correctly, at least some of the wheels have to be removed to allow the armature to be removed.