Have you tried removing the caps from the motor first ? Careful , there is a spring in there !  Or get some phospher bronze and make a tab to wedge under the brush cap and solder to it . The motors I have done all had a small tab attached to the cap , I always solder to that .

No this is the old style DC only . Don't think there is any room for a decoder in there.

 The easiest thing to do is to remove the board from the tender . Then just use the wires from the trucks to connect to the red and black wires from the loco and the red black wires from the decoder. run the orange grey wires from the decoder to the orange grey wires to the motor.

 It's not a decoder , the board just has some regular components for DC operation . The 6 pin connector is just a connector for the wires that come from the locomotive . The board does have connections that are fairly easy to mount a decoder to though . Somewhere on this site there are instructions on how to mount a DCC decoder in one of these tenders.

It won't matter , all decoders are wired the same way . Just follow the color coded wires.

Instructions are here......http://www.tcsdcc.com/Customer_Content/Installation_Pictures/N_Scale/Bachmann/2-8-0/bachman_n_scale_2_8_0.htm

 As you found out , it is never a good idea to oil there !  On motors the ONLY part you want to oil  ( with a very very very tiny drop is on either end where the shaft spins in it's bearings. And you only want to oil it when the bearing is dry . You'll know when its dry because it will make a loud squealing sound . Normally the only part I oil is a couple drops on the worm gear , it will spread to the other gears by itself .  Always use a oil like Hob-E-Lube Lite oil HL662 or something similar .

On the 2-8-0 I have one of these and when I first got it I could also smell the oil heating up . As long as it runs well I would not worry too much about it . Mine is still running like new and I don't really smell it anymore . As James said you can clean the motor , but when you do you will have to lube the shaft bearings when your done .  For now I would leave it alone unless it isn't running right .

 You'll probably have to guestimate the tubing length , then attach the tubing to the other shaft before attaching the drawbar .

AnyRail is a track planning tool that includes EZ Track . https://www.anyrail.com/index_en.html

Do you have the switch connected to the correct terminals on the power pack ? It should connect to the AC terminals , not to the DC track terminals . Or is it possible you got a defective switch ? Does it work OK if you don't plug it in ?  I generally don't use powered switches, I just switch them manually , Although I use Kato Unitrack and it may be a bit different . Does it have a little slide switch on the side of the turnout ?

Is it new or used ? If you bought it used it may have had the decoder programmed so it won't run on DC . Of course you would need a friend with a DCC system to check this . They should also be able to reset it to factory specs so it will run on DC . If its new you may have to return it for repair.

Decoder info ......http://www.bachmanntrains.com/home-usa/images/44913_Decoder_IS.pdf

 Possibly using a rubber band to secure the body,  and use a small amount of epoxy in the hole ? and of course put the screw in the hole while the epoxy sets. ?

 The power packs you have now will be fine as long as the ovals aren't joined together .

 You could just drill a small hole in the rear of the boiler and run the decoder motor wires into the tender. then use the tender pick up wires to power the decoder.