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but I want to upgrade this little locomotive (a 2-6-0 Mogul)
I would concur that it isn't worth trying to fix it - they sold for $25-$50. To solve most of the problems you need a completely new chassis with decent wheels and a good motor.

The Bachmann 4-6-0 is a good alternate, and lots has been written on upgrading it, etc. Alternatively, there was a similar cheap "Buddy L" loco sold for a while, and you may find one for a decent price (less than $100.)

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What about getting a 2-6-0 donor chassis and converting it to battery power?
Bachmann make a decent 2-6-0 with metal gears.

2-6-0 Industrial Mogul : Bachmann Trains Online Store!
I didn't see a chassis available as a spare, and I don't recommend the 2-4-2 version that preceded it. However, these locos are occasionally to be seen for $100-150. I know of one for sale at the moment.

The other Spectrum 2-6-0 is a much more complicated beast and will cost you a lot more.

The problem with all these ideas is that they will cost you a lot more than just replacing the whole set with a better one. Bachmann made gazillions of sets with the 4-6-0 in them, and some have similar freight cars. There are usually a dozen for sale on eBay at anything from $50 to $500.
 

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OK. Here you go. Buddy L set, like the one I pictured earlier (post #3), new in box, for $85.
Listed a day ago in Harrisburg, PA . New In Box!! Please see all photos for box-printed descriptions. Thanks for looking!
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Seller already replied that it is available. "It is located near the Copper Pub south of Linglestown. "
Now she says "Great! I will go as low as $75." Definitely keen to sell it.

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