Lionel Standard O Cabooses - Scale Smokestack Production Error?

I assume your PC bay window is No. 17662. Your situation seems odd. I have four different Lionel scale bay windows (Milw.Rd., CNW, UP and Nickel Plate), and haven't experienced this problem with any of them. The non-scale stack pulls out and the bottom of the scale stack then just slides down inside the protruding tip where the non-scale smoking stack was.   

Yep, that's the one. Of course this one is less common so it'll be harder to find someone else that owns one and can confirm.

What does seemingly confirm this error is that I had to order the scale smokestack from Lionel as it was missing from the person I bought the caboose from. The specific scale smokestack from Lionel that was listed for this specific caboose did not have the notch. I'll have to go back to their site and check if this smokestack was a unique item number to this caboose.

I can't quite tell what type of stack you're trying to put into the PC opening, but apparently the I-12 has a different stack design. The Lionel I-12 is an entirely different caboose model than is your PC bay window caboose. Your PC should be exactly like the four I own (incidently, the Milw. Road version is a lot scarcer than the PC - it was only available as part of a limited set). They're all the same model. None of mine has a notch in the opening. So if you're trying to put an I-12 stack in your PC stack opening, it won't work. Now there's also a much smaller separate stack to install that comes with these bay windows, which is illustrated in the instructions as having a notch. Are you sure you're not looking at the diagram for this smaller stack?

No, I wasn't trying to put the I-12 stack in the PC caboose. I already know about the much smaller separate stack as I've already pointed out in previous posts - the optional scale stack yes. The one that was made for the PC caboose has no notch, nor does the opening in the roof. Where the comparison between the I-12 and the PC came in was that their instruction manuals detail the same notch installation system of the stacks. It just seemed odd to me that to install the scale stack on the PC caboose mandated removal of the smoke unit basin when the instructions clearly state this is not necessary.