It sounds too hot to me. Most modern engines should only be slightly warm.
I picked up a MTH 0-4-0 at the Springfield show in January. It ran much hotter than any of my other MTH engines after about 15 minutes of use. I was afraid of running it longer for fear of burning something up.
The next time I ran it the rods on the right side came apart completely, causing the left side to lock up. I reassembled the rods, gave it a test run and noticed it ran much cooler (still does). I believe the right side rods were binding, causing the motor to overheat. Check the rods on your engine and be sure it is lubed properly.