Since that's an early Legacy, the top suspect is the smoke regulator module. The smoke unit isn't doing anything to smoke volume. However, since that unit has the 6 ohm resistor, when you replace the regulator module, replace the resistor with the 8 ohm one, that was recommended by Lionel years ago as the 6 ohm resistors were too hard on the regulator modules and caused premature failure. (sound familiar?)
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