Paint

I would make all mechanical changes and insure the mechanism works properly before doing any painting.  Also clean up and test assemble before painting.  Essentially do all things that would damage the paint then clean and paint.

Do some research on painting and practice before painting the actual model. 

I like SP lettering gray as a primer with weathered black as the weathering starting point for steam engines.

I'm sure others have different opinions.  Pick the one that fits your capabilities and sensibilities. There isn't one right answer.

Terry

Steam paint

You will probably get alot of different opinions on this. Try not to go to dark and the detail will stand out. One thing you should look at is neo-lube from Micro Mark Tools. I like this stuff.

MARK

Steam loco paint

Steam engine black is actually a shade of flat dark grey. The only time a steamer was really black was when got it's builder's picture, and maybe not even then, The older and more weathered the loco the lighter it will be. Steamers have streaks of water all over that leave mineral deposits behind (i.e. calcium), paint burns from the heath and normal atmospheric wear, coal dust, oil and grease runs, etc.

Also keep in mind that layout lights are a lot dimmer than outdoors, so a great looking model seen outdoors will be too dark on the layout.

Put the same kind of lights in your workbench as in the layout, whatever kind you favor.

Try to use a chemical blackener for moving parts to avoid paint buildups and shiny spots due to wear.

Check as many large pictures as you can ( http://www.shorpy.com/).

And practice until it hurts!.

Mix

I tend to use a mix I read about a long time ago:  flat black, with some white and some red or brown.  Then I weather by applying some white chalk to top surfaces.  I will "paint" streaks with water from pop valves, whistle, etc. and dust them with the white chalk while wet.  I will also dust the catwalks and tender deck with rust colored chalk and "chip/wear" the corners/surfaces with steel paint.  Finally sometimes I will use gloss black paint to streak grease from the generator or other moving parts, and use clear gloss for water spills from the tender hatch... 

I like my engines BLACK

First of all, as commented above, you would be well advised to build the model and get it running with no paint.  Only when it is in perfect mechanical order should you consider disassembling it for paint.  Then, tear it down, carefully clean everything, and paint as you like.

I have a slightly different take on painting steam engines.  I like a straight high gloss black for everything other than the smokebox.  If the smokebox is graphite, I mix silver and black (or gray) to get whatever shade looks right for that particular engine.  There are two reasons for the gloss black.  One of course is to give a good surface for decals.  the other is that I don't think many Class 1 steam locos were really all that faded and worn out.  It depends a lot on the railroad, era, and location, but I think most modelers over-weather their steam engines.

Bear in mind, I model Southern Ry. (and a subsidiary) in the '40s, so my prototypes didn't have the harsh southwestern sun and sand found on the Santa Fe or Union Pacific.  Still, What I do is paint it gloss black, then go over that (with a brush) with some very watered down blue to get that iridescent sheen that black paint sometimes gets in the sun.  Then I add white streaks for water and scale deposits, and airbrush a mist of black for soot - especially around the smokebox and tender.  A little dusting of dirt around the running gear finishes my usual weathering.  The flat weathering kills the shine somewhat, but it still looks like a nice glossy engine underneath - one that may be old but still well loved by the regular crew.

You mentioned "heavily abused," but is that what you really mean?  Do you want used, or abused?  Some industrial engines might have been abused, but I expect that for the most part they were well cared for, even when they were not repainted often and definitely showed signs of a long and useful life.

I don't disagree

Weathering can be overdone, and most engines you see nowdays are in outdoor scrapyards where they have not been cared for in a long time. This gives the impression that this was the way they looked when they were running.  I do think lightening the color from jet black helps, though, and also that weathering can be overdone.  It is best to use it to bring out the best features (like a beautiful woman uses makeup judiciously), for effect.  

A matter of choice...

light and dark

Light matters as well.  I tend to keep my workbench very brightly lit, and have every intention of keeping my layout just as bright.  Under conditions like that, a little gloss picks out highlights just as well as a slight graying of a black surface.  In my opinion, they actually pop out nicely like that.  I also find that a little flat hazy weathering helps to highlight things nicely, while still keeping the glossiness in the background.

As you said, it's a matter of preference.  I prefer to think of railroads a little cleaner than some do, a little more like a place where people were proud to work, and even when run-down still cared for.  Some people really like the gritty industrial side of railroading.  Even the best model railroads tell only part of the story, focus on some aspect of the chosen bit of the world.  The key, I suppose, is keeping the story consistent.

neo-lube

I would like to know more about the neo-lube.  I have built the 0-4-0 porter G scale steam engine kit from Northeast Narrow Gauge, and have wondered about using the neo-lube to "paint" the wheels and side rod and hangers, etc.  Is the neo-lube electrically conductive?  If it is, how do you keep from shorting out the insulated wheels when they are painted?