Cpt,
Jeff I thought about doing what you described, decided it would be better to invest in some more of the MTH P2 repro's down the line instead. After I get totally addicted to the Lionel Legacy then I might have Guns or one of the other guys, like GGG, retro fit an old 263E with the Legacy controls, that is if I can find an original 263E at a train show in good shape, for decent money.
I do like your thinking however!
It's still a bummer that Lionel is not producing some Tin Plate Legacy engines, I would really like a Lionel made Legacy 263E, to go along with my original Lionel Conventional and my MTH P2 Reproduction. These trains have always been a major part of my Christmas season memories. Love to add a new Legacy controlled 263E to it.
PCRR/Dave