Ok, quick primer on model train gauges vs. scale.
"O" gauge is refers to the distance between the rails.
"O" scale is the exact size of the models, which is 1:48 scale for Lionel/MTH
scale models.
Three rail
O gauge trains will be far more user (child)friendly, much more available, and will have many more features and play value for $$$$ spent. Two rail
O scale trains are for specialty modelers that want the most realism, and will typically shy away from anything that does not look like something in real life, and true to scale.
Most
O gauge 3-rail trains are only approximately scale, but because of that, they don't have as many small parts that will break off and not as easily damaged. Now, there are true scale, 3-rail trains, but these are more expensive and are known as "Hi-rail" trains. Many in the HO and 2-rail O-scale hobby look down upon 3-rail hobbyists as "playing with toys," but the advantages to easily wiring in accessories more than makes up for the aggravations of other hobbyists.
Since the bottom fell out of the Lionel boom some years ago, you can find some good used sets from the postwar period up to 1980's that were still made in the good old USA for very reasonable prices when compared with the new Chinese stuff. Get a good die cast 2-4-2 Lionel steam set with a can motor, and it'll last forever. It's the "Model 10" of the electric train world.
