Without seeing what space is available, I can't be too specific. I'd probably try to use something like the mini-FatBoy that Lionel uses for many engines. As for a baffle, something as simple as a spray can lid of the correct size can be used. One of my favorite ways to do baffles is to use thin-wall PVC tubing and glue a lid of Styrene on top. I can make them of any height to fit.
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