John;
I like your idea of putting the magnet on the drive rods.
This way you can run the fan and shut it off with the switch in mid stroke, thus making the smoke puffs sync with rod ends travel like the real engines.
And running lo speed with burst at chuff time also works well. that way even if the engine stops with the reed switch active you won't burn out the heat resistor.
(if you use a one shot triggered by the switch, it would also eliminate the problem)
Also, to convert a PS1 to PS2, they give instructions on modifying the smoke unit, you might want to check into that. (I have a PS2 kit that has this info if you want a copy)
