Paint, Details, and Decals (Updated 10/28/12)
Paint
I generally use acrylic craft paint to paint my wooden trains. Its very inexpensive and can be purchased for a dollar a bottle (or less) at your local craft store. Its far from ideal but you can't beat the variety and price. Since one of my main goals in this hobby is thrift this type of paint is good enough for me. But painting details can be challenging. I use painters tape or just plain masking tape to mask areas for painting. (I prefer to use a brand of painters tape called Frogtape which supposedly specializes in preventing paint leakage under the edge of the tape.) But despite using quality painters tape I still find that that paint sometimes leaks under the tape unless I first spray the previously painted section with a light coat of spray laquer first.
This is an example of creating details using tape masks. All the the straight lines including the windows were done using masking tape.
Drawn On Detail
I also use an ultra fine point Sharpie from time to time to draw on certain details. With my limited skill I feel like I can paint some details onto the train. But I feel like the end result is still a little too simplistic for my taste. A few strategically drawn lines drawn with a fine point marker go a long way. Here's an example of how I think a Sharpie can be used very effectively.
Decals
I've recently started dabbling in decals. Sheets of HO scale train decals can be purchased online but they are pricey. I've been tempted to get some but I haven't been able to bring myself to invest in several sheets which is what it would take to cover a variety of road names, fonts, and eras. Instead I've used a few old decals left over from my plastic airplane modeling days from many many years ago. A simple number on the side of a locomotive goes a long way.
This decal was leftover from a plastic model airplane I made as a teenager. I had a bunch of leftover decals stashed away in a box for some reason. Since I can't produce my own white decals (see below) I thought this would be an easy way to add a little pop to this otherwise drab locomotive. For such a small detail I feel like it's pretty effective.
I've also dabbled with making my own decals using Testors' custom ink-jet printer system. You create your own text or images on your computer then print them out a sheet of blank decal paper on an ink jet printer. Finally you spray a coating on the decal sheet to seal on the ink-jet pigment. This system works pretty well with one major caveat. It's fine for dark colored decals placed over light colored paint. But home printers don't (can't) print white pigment. So printing white decals is impossible. I've tried printing yellow decals but the result was not satisfactory. The yellow pigment is not opaque enough to cover dark colored paint.
The black text here is an example of a do-it-yourself decal. The yellow stripe is a result of masking tape and paint.
Finishing
Since these are toys we're talking about I apply some type of protective finish to my trains in en effort (though somewhat futile) to protect them from bangs, scratches, and dents. I started off using a clear, semi-gloss spray on laquer. Then, for a while, I switched to a matte spray on laquer because I felt that real life trains are never shiny. But recently I've had a change of heart and I'm using painted on glossy varnish. I came to the conclusion that I'm not building models--I'm building toys. And, by golly, toys should be shinny! The blue car on this page up above is an example of a matte finish. It's just too bland.