When working correctly, these locos are great runners, IMO it's worth fixing. Unless you can fit an E-clip or spacer to align the gears, as suggested by Mr. Miller in the post above, I believe you would have to remove the sideframes and pull the wheels to replace the intermediate gears. That's a lot of work best done with special-purpose tools. So YES, it would be easier to replace the whole motor truck.
The parts diagram on lionelsupport.com shows the motor truck as a unit. Lionel's price is $95, unfortunately it's unavailable. There are some modern era experts on this forum (@Chuck Sartor comes to mind) who might have the part on hand in their service station.
Honestly, these locos have become quite affordable; I would look at the For Sale board on this Forum, or a well-known auction site. Try to find one that's less than perfect, and cannibalize it for parts. If you want it to look original, you'll have to find a Dash-8 40C because these have a truck casting that's different from the much more common EMDs, and even from the last GEs that Lionel made before they switched to can motors.
I hope you can get it fixed because I'm sure your grandson would be thrilled! Good luck!!
