The S gauge market is different than O gauge since we in S have so few engine models available. A painted plastic shell done with adequate detail would sell to almost all high rail buyers. It would not impact my purchase decision. Those who want engines for scale layouts are a different pool of buyers. My personal opinion is plastic would be acceptable for those buyers if scale wheels were made and could be swapped easily.
Just my opinions but if it were my money I would take the risk and do a painted plastic steam engine.