I thought this might be of interest to some folks here. I am working on installing a decoder in an old, very non-DCC-ready MDC 2-8-0. As it turns out, it's not difficult, but it helps to have some direction ahead of time.
As with most old steam locos, the challenge is insulating the motor from the frame. The open frame motor in the model has one brush insulated, but the other is in direct contact with the motor frame, and thus with the model's frame and right hand rail. The simple thing to do would be to replace the brass bushing that holds the brush with an insulated one as used on the top - but where do you get one of those these days? The next best thing is to replace the mounting screw with a plastic one, but I think it's metric, and I don't have any on hand.
Since I am a believer in keeping things simple and using what I already have on hand, I had to come up with a different solution. What I did was to glue a piece of styrene tube into the hole in the frame, through which the motor mounting screw passes. Make sure that the tube does not extend beyond the bottom of the hole - the top is okay, since it can be trimmed off easily. When the glue is thoroughly cured, drill the hole out carefully so that it will just pass the screw - take your time because there won't be much plastic left, and if you deviate a little you can cut through it and let the screw short against the frame. Using a chisel blade, cut off any of the tube which extends above the frame. Make an insulating washer by soaking a piece of paper with super glue (might as well do it while gluing the tube in place), and when it's dry poke a hole in it and cut it out somewhat larger than the head of the mounting screw. Insulate the bottom of the motor with tape (kapton if you have it, scotch tape if you're cheap like me, and poke a hole where the mounting screw goes.
I chose a TCS M1 decoder because it is cheap, tiny, and I REALLY like their warranty. As it turns out, the decoder is almost exactly the same side as the end of the motor, and there's a little room between the motor and the inside of the firebox. I just used scotch tape to tape the decoder to the back of the motor, with the wires facing up. The orange wire is soldered to the tap on the top brush (or anywhere on the brush, but the tab is easiest). The gray wire is soldered to the bottom brush, or anywhere on the motor frame. Mine is a little tight, as I cut it a bit short, but it works.
With the decoder taped to the motor and the wires soldered in place, screw the motor to the frame as usual. It will be a little harder getting the screw started, but it should go in and seat properly. Make sure to put the insulating washer under the head of the screw.
If your model is more or less complete or at least has some way of picking up power from the rails, you can solder the red and black wires in place as best suits you. I'm having to re-make the pickup on mine, and it came without a tender, so for now I'm clipping the wires to the rails for testing. MAKE SURE TO TEST THE DECODER ON THE PROGRAMMING TRACK FIRST! If there are any shorts between the rails and the motor brushes, you must correct them before putting the loco on the track. I have fried a decoder that way (why do you think I like the TCS warranty?) and very nearly fried this one. If the decoder responds to programming properly, takes an address and reads it back properly, etc, put it on the layout and make sure it runs. Assuming you did everything as described, you should have a decoder-equipped model for little more than the cost of the decoder and about 30 minutes of time.
Here is my model on the work bench, showing the wires soldered to the motor:
And on my layout, with wires trapped in switch points for temporary testing:
I am happy to report that the little beastie runs fairly well. Of course, there are a number of places to mount the decoder, including the tender (if you have one). That's the easy part. The tricky thing is figuring out how to isolate the motor, and I think the method described above works remarkably well. One thing I like about it is that it requires no modification to the model, with the exception of adding an insulated sleeve to the mounting hole.