The O gauge steam engines seem to have a lot more detail, features and better electronics. I would guess the cost to tool up an S gauge Legacy steam engine would be less than an O gauge. The sales volume is smaller so fewer units to amortize the one time costs over. There are so many O gauge engines released it is not apparent that the sales volume of a specific engine in O is a lot larger than in S.
I would buy multiples of a nicely detailed Legacy Hudson, Berkshire, K-5 Pacific, Texas, etc. I would expect an MSRP for these to be more than $1,200, less than $2,000.