Both wheels on each side need to be placed on the axles EXACTLY in the equivalent rotary position. Do one side at a time. Put the rod (that's what it's called) onto one wheel, then rotate its adjacent other wheel so that its rod opening is EXACTLY in the same clock position. Then they will not bind.
On a real steam locomotive, the drive wheels are arranged on the axles so that a wheel on one end of the axle is exactly 90 degrees out of phase with the wheel on the other end of the axle. This scheme is used to prevent a standing locomotive from being stalled due to the cylinders (on the left and right sides) both being at top- or bottom-dead center. When the wheels are "quartered" at least one cylinder will NOT be at top or bottom dead center. On toy trains, the cylinders are just there for looks, the drive rods just float around in the fake cylinders, and there's never a chance of their becoming stalled. The motive power comes from the axles to the wheels, not from the cylinders to the wheels.
It looks prototypical on a toy to arrange the drivers in a "quartered" arrangement, but it's not relevant to the operation of the locomotive.
