I think if you use a SPDT micro switch, you can use the leftover 3rd switch contact to effectively ground the hot wire to the motor when the juice to it is switched off.
I've kinda' signed on to the idea of not turning the fan off completely, it makes perfect sense to just run it slow and then hit it with higher voltage for the chuff.
If you were to use a reed switch and magnets, how would they be attached to the drivers considering how close the fit is between the inside of the driver and the frame? Just wondering what you had in mind?
There's plenty of room in this shell to get creative, I could almost cram the Cruise Commander and the RailSounds Commander in there. I don't think there's any problem finding a place to tap off the motion for the chuff. I'm thinking of using the rod motion to trigger the chuff so it's synchronized.
John, I was assuming you would run the smoke unit from track voltage as it is now. If you run it from the R2LC it might smoke like a Lionel:-)
Good point, and I may well do that. I would use the R2LC output to at least drive a relay so I can turn off the smoke from the remote.
A magnet or a trigger could be attached to the fly wheel and trigger a chuff switch or reed that way.
The gearing appears such that a magnet on the flywheel would probably give me about 8-10 chuffs per wheel revolution, I think that may be too much of a good thing. I'd like to synchronize them with the movement of the steam pistons.
For the reed switch, you could mount it on the tender and run the signal in via a harness, which you may have to have anyway.
I'm sure I can put it in the locomotive, tons of space in there.
What program is used to draw the circuit diagrams? Is it a free application?
The application is TinyCAD and it is indeed a free application. The only issue with this one is the symbols for the transistors need work and they don't line up on the grid. Easily fixed, just too lazy to do it right now. 
The one element is on at 8Volts and the second comes on at 10-12 volts.
Actually, the series string is always energized, it's wired directly across the incoming power. They're just using the switch to short out one of them for low voltages. When Q2 is turned on, it shunts R1 and puts the full available voltage across R3. For command operation, that circuit probably would never be energized. My only concern is that this unit probably isn't designed for a steady 18 volts, so it may overheat.
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