I cannot believe this. Is this an easy fix, or a warranty return?
I vote for warranty return. A betting person says that sounds like the tiny slats of the optical tachometer rubbing against something. There is plastic guard that is supposed to route the wires and prevent that type of rub, or it could be the encoder hitting the optical sensor or something else.
2 things about that- running it will heat and melt the encoder ring from friction ruining it- but also whatever it is rubbing on.
Again, stop running it, and either send it back to lionel, or completely take the shell off and find the rub, but being the rub is already that loud, damage may have been done to something.
Again, what I'm getting at is the high pitched frequency of that rubbing sound, definitely points at the flywheel and specifically the fine pitched optical slot encoder. Because that is super thin and semi fragile plastic, and if even one slot is broken, damaged, or blocked, you will then see motor speed skip and also affect chuff. The rubbing tends to deform and weld the plastic and I have seen a situation where a rub quickly ruined an encoder ring. Worse, if it's the sensor rubbing, then both the sensor and the ring melt and plastic weld from the friction. You would be surprised how this goes from annoying sound to that's not good, to much bigger problem.
Also, these rings are $8 and then $10 shipping and no you should not be dealing with that, not on a new engine.
https://www.lionelsupport.com/...-RING-OPTICAL-LEGACY