So to clarify, the thought is that the back end of the engine is allowed to swing right or left due to drivers that are gauged too narrow, correct?
I don't think so. As has already been said, the worm gear arrangement produces side pressure, causing the back of the wheel to rub hard against the face of the bearing, causing wear.
If there is too much lateral movement then could it be that the hubs on the back of the wheels are worn down to give this excessive movement?
I think it's the bearing that wears.
Regardless, replacing or resetting the bearing will address the problem, as would adding spacers between the wheel and bearing.
On Berkshires and turbines the flanges of the end wheels extend behind the next blind wheel, so it is possible for the bearing to wear to the point that the flange can rub on the next wheel.
Another type of wear is when the axle holes wear, making the axles sloppy in the bearing.
I have seem locomotives with both types of wear, and locomotives that had reasonably tight bores (axle holes), but worn ends.
If it's just a worn end, I usually will install 671M-23 or 671M-19 washers. The trick is to guess whether to use one or two. It is a whole lot easier than replacing bearings, especially since many of the bearings available today require reaming after installation.
I have the tools to remove and replace wheels.
For those who do not, some people report success using horse shoe washers, or bread tie plastic to make a ring with a slot that will snap over the axle.
I forget the exact application. Somewhere in the Lionel manual they recommended cutting a slot in a washer to snap over a shaft or axle.
Something similar can be done to fix a loose e-unit lever. I think some folks put the washer behind the spring washer. I have put the washer between the fiber plate and the metal e-unit frame when I don't feel like taking apart the top of the e-unit to get to the back of the eyelet.