The original ProtoSound 1 didn't have puffing smoke, it just puts out smoke all the time. Also, the smoke unit is powered from the track voltage, so there should be no change when the locomotive is moving. I'd look for wiring issues between the smoke unit and the track feeds.
If the engine is stopped, after a few seconds, it puts out a steady vertical stream of smoke. The would indicate, to me, that the fan is working. At least, while the engine is stopped. Once the engine starts moving, the smoke dies out.
Maybe a wiring connection that opens when the engine moves, but closes when stopped? I'll try this route.
