Hi Rich,
You are correct in saying that the best light of the day is before 10AM and after 4PM. I would add one caveat. If you shoot outside the period between April and August, the interval when there is "bad" light....meaning harsh, high sun....is shorter. In winter, high sun is non-existant.
Why is high sun bad? It is bad because the lighting is indirect. Most of the sun's rays are on the top of the subject, not on the sides, where you need it when taking a photo.
Most of my visits to Narrow Gauge Land have been in September and October. By that time, you can shoot any time of day and you won't have the harsh, high-sun conditions. I was in Chama just last week, and we did have decent light at morning train time. It was not the best light of the day, but it was not the objectionable, harsh, high-sun that you would get if you tried to shoot at the same time in June.
This is why I would recommend that the C&TS run its freight charters in September (vs. August). The light is better all day. It does make a difference.
WRT the worst conditions..... The worst conditions occur when you have bright, white, cumulus clouds, and those clouds are blocking the sun. Then, you have a very bright sky and a very dark subject. Your camera (or even my D4) cannot handle the dynamic range. You either blow out the sky or you spend a lot of time in Photoshop trying to brighten up a very dark subject.
An overcast, cloudy day is actually not a bad thing. I would prefer it to the condition described above.
/Kevin