I would try the washers between the roller assembly and the power truck and see if that works. The only other thing I could think of is the engine is drawing a lot more current then it should be, and that is causing the arcing. When you bought the engine, did you take it apart and check things like the gearing and if it has fresh lube and isn't binding? Is the commutator on the engine clean and does it have good brushes? If the engine is binding because of the gearing being poorly lubed (old grease kind of hardens up) or not meshing right, that will cause it to draw more current than it otherwise would. You could put an ammeter on output of the transformer when the engine is running and compare what it is drawing versus another engine that is fine. I wouldn't be surprised if you took it apart you might see old grease in the gears that mess with the worm gear off the engine.
