Okay so I've searched far and wide for a helpful thread and came up empty so let's start from the beginning. I'm thinking of upgrading my Lionel 785 Gray Hudson and need some advice. Do I leave it as is to preserve it OR look into upgrading i.e. motor, sounds, smoke, command control? Should I decide on the latter, what recommendations can you provide? Please keep your comments helpful and respectful. 
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I have the same locomotive. It is a nice runner from a scale speed perspective, but if yours is new start by getting all that old grease out and re lubricating the gearbox. Also lightly oil the axles and motor. (Although it will handle 031, I would run it on 042 or wider.) Then what I would do is set it at high voltage and let it run for a long time - these really need to break in.
As far as command control upgrades, those are really a product of your budget and skill level. What I did was to tune mine to run as well as it could in conventional mode, and then I stripped out the mighty sound of static and installed a railsounds board in the tender (featuring Hudson whistle - was a good eBay snag.)
Start there and see what you think. Personally these locomotives have a nice scale speed so there is less need for command control but that is personal. Also, if I really wanted a modern command control Hudson, I would find one of the TMCC versions from the late 90s or an MTH Hudson.
Good luck!
If you want extensive upgrades... check out threads/posts by Pat @ harmonyards for motor/drive line/wheel/back head upgrades etc., stunning craftsmanship! Here is mine... Dennis’s 763 ( 6-18056 ) Hudson gets the swap! Tales From Harmon Shops
Maybe... consider a Blunami 4408 for control & sounds?
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