So at this point I have successfully added the color string lights from Evan Designs, and the old diesel switcher is now ready for Christmas. The light string options used: 26 LED version with Nano bulbs, and 9-18V ready. You might notice that one LED is not lit -- Evan Designs warns that they are delicate and to handle with care, so I guess I got one casualty during my install. Still looks good to me, and that string is glued down pretty good. And you can't really tell, but I swapped out the interior incandescent bulbs with LEDs, also from Evan Designs. Blue for the cab, and cool white up front.
Additionally, thanks to new e-unit from gunrunnerjohn, this locomotive now operates in both directions as intended. The replacement board was bigger than the original, but some time with a Dremel tool and mounting it on its side resolved that issue.
Next, I will see if I can fit a sound board and speaker somewhere in there, and hopefully it will be a nice gift to a close friend.