Replace the speaker.
That oval speaker looks like the same one that BLI uses in its Mikados, and it's pretty much terrible. Pull it out, and use an 11x15mm flat cell phone speaker in its own enclosure mounted up in the front of the coal load area firing down at the tender floor. You'll get better sound and room for the decoder.
With help from one of my club members, we were able to get an ESU speaker in with minimal modifications. I removed the factory oval speaker and the weight under the coal load. The wires to the speaker were cut, striped, and soldered to the new 11x15 speaker. The some of the weight was removed to help the clearance of the speaker. Only the area that protruded past the top of the tender was removed (this area was cut in such a way that the oval speaker fit right into it. This excess was removed). The remaining weight was placed back under the coal load and the speaker under that.
I did a quick test of the locomotive, first by itself to make sure the sound worked, then with a 7 car passenger train. It seemed to work. Will need to mess with some minor things like the speed table and sound volumes but it works.
