Mike, as a long time buyer and operator of starter sets, I can offer some comments.
Plastic Gears: The main issue here is consumer maintenance and the recent composition of the plastic. I have modern era Lionel locos with plastic gears (as well as K-Line) some now years old, and the gears are fine. I also have MPC era engines (now over 50 years old) with plastic gears and have had no issues: They still run just fine. Keep the gears lubricated with a plastic safe lubricant and NEVER set an engine directly down on the floor or carpeting: That's a sure fire way for the gears to get grit, dirt and fibers into them.
I've read some comments here about plastic gears cracking. My most recent Lionel engines are pre-LionChief, and I've had zero issues with gears breaking. I'm guessing it is a change in the plastic composition. I have MPC era Lionel cars with plastic trucks and the couplers still spring open on their own. I have mid-1990's (and later) Lionel cars with plastic trucks - same design on the coupler parts - but they no longer spring open on their own.
Motors: I'll have to take exception to Norton's comment. Nearly all of my diesel engines have the truck mounted DC can motors with a spur gear. I've had no trouble with them. Very few motor failures, and because this is a common part (with a VERY large and lengthy production run) you can still get the motors. This truck mounted can motor design has been in use since the late 1980's. Not only starter sets, but nearly all of the traditional separate sale diesels used this motor truck, so again, it's a very common part and not difficult to get a replacement. Even if it means buying a used engine to strip for the parts... sometimes that's a better deal money-wise.
Some of the LionChief engines use a much smaller DC motor with a worm gear. These include the Dockside, the Thomas series, the 0-8-0 steamer, the redesigned Lionel Junction steamer and the new Tier 4 diesel. I personally avoid these motors as I've read far too many comments about them burning out along with difficulty in finding replacements. The other LionChief engines use the standard truck mounted motor with spur gear. The Lionel Junction industrial switcher also uses the same motors, which was also used in the previous issues from the mid-1990's. The LionChief PLUS uses a totally different larger vertical mounted DC can motor.
The tech at my now closed Lionel shop said he replaced more motors on the Dockside and 0-8-0 engines than he ever did on the starter set 4-4-2 and the similar 2-4-2.
The plastic frame starter set RS-3 has one single truck mounted motor and thus as is, doesn't have much pulling power. But the motor is the same motor used in the starter set die-cast 4-4-2 steam engine, so you can safely add the same amount of weight over the motor side of the RS-3 frame. Lionel recommends a 10 car limit for the 4-4-2 engine, though it will certainly pull more than that.
As a side note, I adhere my traction tires with double stick carpet tape cut into very thin strips. A single motor diesel, with weight added and tires adhered has no problem pulling 10-12 train cars. Since my current layout is the smallest I've had, and I can no longer run longer trains, I've been stripping some of my dual motored engines down to a single motor truck, adding some weight and I have no trouble pulling 10 cars with any of these single motored engines.
Roadnames: Lionel has gotten better with modern roads on starter sets since LionChief. But even pre-LionChief, there were sets in contemporary roads like Conrail, CSX, Canadian Pacific and Union Pacific. If you hunt around, you can still find either new sealed, or lightly used Lionel starter sets with a transformer instead of the LionChief remote. The reality for starter sets is that steam sets outsell diesel sets and freight outsells passenger sets. Previous CEO's of Lionel said that the 4-4-2 steam starter sets outsold all the other train sets combined, which means outside of maybe track, it was the single best selling item in the Lionel catalog for many years.
Transformer versus LionChief: I prefer transformer sets. Using the right transformer will allow these engines to run SLOWLY with no modifications... I guarantee it. The Lionel 1033 is perfect for running these sorts of engines, using the B-U setting of 0-11 volts to the track.
You read about problems with the LionChief sets, but considering how many they actually sell, the problems I've read about are probably a small number. Still, with all the circuit boards, there is more to potentially go wrong. You can always strips the boards out, a put in an older reverse unit circuit board, thus running them with a transformer. You lose the sounds, and the remote, but if LionChief circuit boards were unavailable, you could still salvage the loco and have it running.
Other brands: Don't over look K-Line and MTH. You can still find sealed sets if you search enough. MTH in their early years had the Dash-8 sets that came in current roads like Norfolk Southern, CSX, Conrail and others. The early Railking sets were transformer controlled. And while parts may become an issue with MTH, buying engines from a starter set are probably a better bet for finding parts because the quantities made were larger. Especially on the early production MTH as at one time early on they had almost 50% of the 0 gauge market in sales.
K-Line had many MP-15 starter sets along with the S-2 switcher. The MP-15 is a more modern diesel than the S-2, but they didn't do many modern road name sets, though there were a few early on like CSX and NS. But Union Pacific and Santa Fe are current enough and they did lots of sets in those roads.
Choices: It's a little confusing, but there are far more options today than ever. Every thing has its' advantages and drawbacks. I prefer 027 tubular track and you can still find train sets with this in them. But FasTrack has it's advantages especially with floor set up train layouts. I prefer transformer sets, but LionChief is designed in part to help reach the younger generation more familiar with remotes.
Even terms like "traditional" and "semi-scale" which were not needed years ago, because that's what Lionel was. Period. Now with the scale line of trains, some clarification is necessary. And while it seems like the scale stuff is taking over, it's not. But as one distributor said to me, the scale stuff sells itself. The buyers come looking for it and purchase year round. But they have to because the quantities made are much smaller, so you run more risk of not getting what you are looking for. The starter set "tradtional" market is a little more seasonal with the winter months. Plus you have decades worth of production on the secondary market, which the new items are also competing with.
Have your pastor friend go to YouTube and search out Lionel train layouts. There's lots of them there and that may give him some idea of what he'd like to do, and therefore the direction he's going to take. Google too: Search for small Lionel train layouts and you'll see photos of layouts that very well may give him some inspiration.
Have him go to some train shows or shops if there are any in his area. Ask questions. You read a lot of comments here on this forum about starter set junk and what not. Sorry, but my personal experience is completely opposite. I've never had an out of the box defect. Everything has been repairable. Parts are starting to become an issue even for starter sets, but you can always buy a second unit to strip for parts. Again, more of these products are manufactured, so this is an easier task. As I mentioned above, using a transformer like the Lionel 1033, and even the K-Line starter set engines (known for being speed demons) will absolutely run slowly with no alterations.
In 32 years, I've only had to replace 3 DC can motors: Two on different K-Line S-2 switchers (which I run a lot!) and one on a Lionel Industrial Switcher. And I had to replace one smoke unit on a Lionel 4-4-2, which after 17 years, might be expected.
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