The idea of using a bicycle speedometer is interesting. I only have the one problem with it, reliability. My guess is that Avocet or any other manufacturer would not endorse this type of application for their product. We are talking about a steam locomotive, a very harsh environment for a piece of electronics. Just with the normal oil, dust, dirt, and grime from a single trip the device would probably not register accurately. Also if you encountered a hot box, the heat from the axle and box could melt everything except the magnet (Most of the ones I have seen are encased in plastic). Lastly, the sheer vibration of a 120-ton locomotive rolling down the rails could shake the thing loose. I have had problems with the $65 computer on my mountain bike. That is a considerably less stressful environment than a locomotive.
My Suggestion: Find some type of very durable mechanical speedometer that could be read on an analog gauge in the cab. It might cost a little more but I bet it would last quite a bit longer.