* https://en.wikipedia.org/wiki/Whyte_notation
Your story is reflective of my own. Following rules and responsible actions were rewarded with a new level of trust concerning rarer and more powerful units....and that jumble of cars in the box is reminiscent of my own for years, but non the less, killing me today, lol. Boxes within boxes saves tons of damage 
Those are traditional Pulmor motors. Folks will know them quickly if refered to as: Southern GP-9 #8774, #8602 * 2-4-2 Columbia style steamer, D&H Alco #8252 (I always thought a sharp engine) etc. etc.
The cars also have a similar number on most too. In fact the cars often have the build date on the side. "BLT by Lnl 77" etc. The B&O passenger cars are "Baby Madison's" ("027" version not full sized)
The info is a little scattered. I assume no other train is running past that point right? You should test with another unit before doing all this track work.
The solid pin is safer IMO yes. I burnt myself on one of the hollow ones, then about a year later, running baby Madison's in the dark, I noticed another because it was glowing red hot. If you can, replace all 3 pins. But the center pin does more work, so solid metal pins should be done there 1st.
If its on carpet, red hot can cause a fire. Plus if you have a little one, that heat and/or 10vac± on soft young skin are going to be felt when encountered.
Lean a sweaty forearm across a powered track and you'll get an unpleasant little bite, kinda like testing a 9v battery on your tounge.
Your guesses about corrosion and resistance and heat are correctly related, but heat isn't always there. Cleaning the contact points of a piece of track and the lock-on blades would help. Wire brush, fine sandpaper, etc. any coarse rust. Oil &wipe to loosen fine rust, etc. Check for debris on the underside, etc.. Power can jump via rust streaking on one the lock on. There are actually quite a few variations of lock ons too.
(Watch stray abrasive, never steel wool where the train runs because the stray particles are magnetically attracted to the trains when running)
