Here's one of my favorites. I don't own one, but would like to. This is a 257. There is also a 258 that looks the same. Read the descriptions carefully. Great for collecting. As far as running, they may have issues. Quite a few on e-bay right now.
http://cgi.ebay.com/Vintage-Lionel-Lines-No-257-Locomotive-Coal-Tender_W0QQitemZ290043156760QQihZ019QQcategoryZ4145QQssPageNameZWDVWQQrdZ1QQcmdZViewItem
A 262 is also a real nice tinplate loco. A nice one won't be priced as insane as standard gauge stuff..Beware of the broken cowcatcher on these engines from being dropped. Mine has suffered this blow but it was done' by my father-in-law many, many years ago so it's sentimental to my wife.
here's one:
http://cgi.ebay.com/Lionel-1931-262-Engine-T-tender-2-607-1-608-car-Box_W0QQitemZ320039650468QQihZ011QQcategoryZ4145QQssPageNameZWDVWQQrdZ1QQcmdZViewItem
Mike S.
Dont forget about American Flyer. They made some nice locos in O gauge/pre-war.
This is one I use around the Christmas tree. It has a whistle that toots as it runs. I think its a #391? I love it. Great little runner.
For a book, I think a good starting point would be "The Standard Catalog of Lionel Trains 1900-1942" by David Doyle. Contains both trains and accessories, lots of pictures, decent descriptions, and histories. I think I got mine for around $25 and you should be able to find it in most bookstores or Amazon.
I like everyone's suggestions, but for me its the 259e. Its simple, but one of the more rugged models of the time. I have two and they just keep going and going. You shouldn't pay more than $100 for one in excellent shape (including the tender). Mine is pictured below pulling a 603 Pullman and 604 Observation car.
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