OK, I'm in N scale and that installation looks like a tough one. One change I would make is the red and black connections. I'd try to solder them to the light board pads where they slip into the frame halves. Naturally, they still need to be isolated from the lights as shown in the instructions. The channels wouldn't need to be cut down to the brass truck pick ups and assembly would be a little easier.
I put a Lenz dime-sized LE055FX decoder into two of those locos several years ago. The Lenz number for that decoder has changed. A TCS M-1 is an equivalent size to the Lenz decoder. The weight had to be milled out to make room for the decoder, and the entire frame had to be disassembled to get to the motor brushes so they could be isolated. Not an easy install by a long stretch.
Definitely NOT an easy install by any means.
I'm sure people wonder why many of us posts links to TCS install photos when they clearly stated they are using a different brand decoder. Simple - the procedure is pretty much the smae assuming the decoders are approximately the same physical size. What brand doesn't really matter. And TCS has one of the most extensive collection of install photos anywhere - mainly because they 'bribed' users to submit photos of their installs by offering a free decoder. Other vendors have lists of which of their decoders fit in which locos, but TCS has the pictures as well. And on tricky installs like this one, you can't beat a set of nice clear photos.
--Randy
Modeling the Reading Railroad in the 1950's
Visit my web site at www.readingeastpenn.com for construction updates, DCC Info, and more.
Here is a link on installing a TCS decoder.
http://www.tcsdcc.com/Customer_Content/Installation_Pictures/HO_Scale/Kato/Kato%20NW2/kato_nw2_m1.htm
Peter