Vintage AC-DC converter, what's this mystery component?

Odd, my guess is a circuit breaker of some kind.

The component appears to be connected on the AC side of the rectifier, so I'm going to second GRJ's suggestion that it's a CB, though it bears a slight resemblance to a mercury switch.

Miniature ignitron rectifier  

Karl, my first thought was "I've seen this before inside of a thermostat."  But the liquid isn't silver like mercury, it's amber like lubricating oil.  There are some numbers on the glass, partially visible in the photo.  But I'm not an EE and they don't mean anything to me.  The copper wire has some kind of sleeve where it contacts the glass.

Could its function be like that of a capacitor, i.e., to reduce the AC "ripple"?  Since there is no capacitor, I expect that the output would be a noisy, bumpy DC waveform.

The 8017 bridge rectifier isn't especially large, and it's not heat-sinked to anything that I can see (the case itself is plastic.)  I wonder how much current this was expected to handle?

In the literature, Lionel claimed that any of their trains made up to that time would run fine on DC, except that horns and whistles would have to be disconnected, else they would blow continuously.  There was no warning about magnetized e-units, etc.

Circuit breaker, sometimes called a "Clicker Fuse" see here. More information here. The oil in the above example is probably intended to kill the arc.