I really, really, REALLY appreciate all the advice and information. I've learned some different things. It even spurred me to search out other threads so I could figure out what a "TVS Diode" was. I'm definitely going to make some changes to my wiring based on what I've learned.
The seller took the engine back. He's not a train guy, but is planning on working on it, so I shared the various suggestions from this discussion with him.