It probably won't work.

I've had a couple Marx locos, and they ran on my Lionel 3-rail just fine. Which means that you should check a couple of things. Assuming nominal O scale:

The third rail supplies one side of the AC power for the motor, and both outside rails are the other side. This means a lot for your intention to switch to 2-rail power. Just look carefully at your track before you pull it apart. The center rail is insulated from the ties, and the outside rails aren't. Look for a fibrous non-conductive insert (thick paper) between the center rail and the ties, and a solid connection between the ties and both outside rails. You can also put a locomotive on its back and apply wire leads from the transformer, one to the shoe in the middle, and the other to the rim of a wheel. This should make the motor run.Try one lead from the transformer to a drive wheel, and the other lead to a drive wheel on the opposite side - this is two-rail supply. I expect that you will find a dead short. 

You can also use a conductivity checker - find a multimeter and use it in open/short checking mode. The two outside rails are connected (meter beeps) and the center rail is isolated from the other two (open circuit).

If your Marx equipment is like any other I've seen, then it will be very difficult to switch it to 2-rail power. You will have to figure a way to insulate left and right side wheels from each other, plus arrange for power to go from one rail to the side of the motor normally supplied by the center rail. 

All the above makes no mention of your intended minimum radius. Tightest curves for Marx or Lionel that I've seen are radius 12 or 13 inches. So your 8 inch radius is a real challenge. Even in N scale it's tight. HO trolleys can be made to work around that radius, but it's dicey. For Marx in O scale. how can anything go around that sharp a curve? In your 4 X 4 ft space there isn't much room with given radius of track as it comes for more than an oval plus a spur or two.

Try finding a book or online info about O-27 layouts, even if they're Lionel, for what might fit into your area.If I were you I wouldn't try to touch reworking 3-rail into 2-rail.

Good Luck

DrJolS

Two Rail O Gauge Layouts

There are still many modelers running Marx and Lionel, O gauge, three rails layouts. We have an 8” x 18” layout at the club with a good sampling of Marx locomotives and rolling stock. Several club members have two rail “scale O” layouts.

Rolling Stock

It is possible to convert three rail stock to two rail, but it entails replacing and isolating every wheel set in every unit. Isolated trucks and wheel sets are available for rolling stock (from scale O manufacturers), but if you intend to convert any trucks with metal side frames they will also have to be replaced. You will have to isolate the wheels in the engines which is definitely not and easy task. It would be easier to buy or scratch build two rail O gauge equipment.

Track

If you do convert you are probably better off just buying two rails O gage flex track from an outfit like GarGraves ( O-Gauge 2-Rail with Tinplated rails, O-Gauge 2-Rail with Stainless Steel rails. GarGraves also supplies O gauge two rail switches. But as DrJolS commented, it will be had to get reliable operation on eight inch radius curves.