Parts standardization used to be a Lionel strong suit. Since the turn of the 21st Century I would give MTH higher marks in this regard (although minus points for not having all parts diagrams easily accessible on their website .) I guess the Chinese factory contracted for this production run couldn't get the smaller screws, and thought there was enough clearance to go one size bigger? Your findings confirm my fears... even aggressive cannibalization might not be enough to keep today's locos running in the distant future.
Rare enough in 3-rail, I notice this loco has a split chassis with a "bottom plate." I'm actually a fan of this design. Are the front axle bearings properly clamped between the chassis and the bottom plate?
Not sure what you're planning to do with the screws. If the size and thread are different you won't be able to put an old screw in the existing wheels. You might be able to replace the front wheels and axle as a unit, and THEN use the old, smaller screws. The part number for the side rods is the same, which is a good sign. You also might have to cut off the "chuff cam" if there isn't a relief for it in the current model's chassis. I would order more than one wheelset in case you mess up, or in case the quartering isn't spot-on.
[Aside: I love how you can buy as many wheelsets as you want for the older models, but for the LC+ locos, "You must contact Lionel to order." Do they really think someone is going to hurt resale by building a counterfeit? Cmon, parts is parts. If you want price appreciation, buy mutual funds and leave the trains for us operators ]
Re diameter... O27 is dead, and O36 is the new O31. Ross (my favorite track system) doesn't even make O36 so you have to move up to O42. For those of us in the Land of No Basements, if you don't have a McMansion with at least 18' on the long wall, you're not in the game . Seriously: after buying 3 of these Mikados I admire your determination! You'll give up some slow-speed performance to the larger driving wheels and taller gearing, but if you're determined to run on O27 you might have better luck with the LC+ Pacific. Please keep us posted with your findings. -Ted