Is it possible to add a small potometer to adjust the volume?
Maybe? To prevent any chance of damaging the amplifier in the LC engine, I would look at using an L-Pad instead, which is pretty much a special potentiometer with a second resistor inside, designed to maintain the same impedance on the amplifier.
For low-power applications these are not particularly expensive, around 5 or 6 bucks, but they are a bit larger than a typical potentiometer, perhaps 1 3/4 inch diameter. I think there would still be plenty of room in the tender of most LC steam engines, but I'm not sure about diesels.
I wouldn't use a normal potentiometer on one of my engines, but if you decide to give it a try, you'll want to use one that is "audio-tapered" not linear-tapered, if you want a smooth sound adjustment from one end to the other. I'd also avoid turning the volume down all the way here, as depending on what sort of amplifier is used it could damage the circuit. All around the L-Pad is probably the right choice as opposed to a normal pot.