Interestingly enough, this was the first N scale locomotive to come with a factory-installed decoder (or at least the first non-European prototype). The tiny dual-mode Lenz decoder is mounted inside the cab (pictured below), with wires soldered to the PC board for track power and motor control. Unfortunately, said decoder is a bit primitive by today's standards. Nevertheless, major kudos to Arnold for being the first manufacturer to bring DCC to North American N scale (and years before anyone else).
These models came packaged in the familiar Arnold "plastic box with orange paper inserts", and were primarily imported by Walthers. Rivarossi acquired Arnold in the mid-90's and newer units will be packaged with "Arnold-Rivarossi" inserts. Arnold's S-2 was ultimately discontinued with the bankruptcy (and subsequent liquidation) of the Rivarossi company in 2006.
The chassis/frame is entirely made of plastic, with most of the actual heft being provided by the all-metal hood piece. The motor is an open-sided 3-poler. The dual driveshafts are actually metal springs that turn the truck-tower gears directly (IE, no worms). The truck gearing is a mixture of brass and plastic. All wheels are geared and provide pickup (no traction tires). Sticky-uppy metal contacts on the trucks transfer current to a PC board that mounts inside the frame. The PC board in turn transfers current to the motor. Couplers are truck-mounted Rapidos (open pilots). There is no lighting. The wheel flanges are over-sized, so these will not run on Code-55 track. The PC boards on the decoder-equipped models differ from the non-DCC models - the DC-PCB's route track current directly to the motor contacts, whereas the DCC-PCB's don't.
Performance is pretty good, although not nearly up to the standards of more modern yard switchers (Life-Like's EMD SW9/1200, Kato's NW2, etc). Yes, pickup is good and pulling power is adequate. However, these models run fairly loudly and they have very little subtlety in terms of their throttle response (tending to start and stop on dime). Slow-speed creep is just OK. I think the main problem here is that "spring" drivetrain. Without flywheels (or even worms), there isn't much in the way of weight to smooth things out at the low-end of the throttle (or the high-end, for that matter). So, pretty good for the early 90's, but nothing to get excited about these days.
On the noise front, these locomotives have been plagued by two recurring issues (both of which contribute to the problem). First, if the spring/worm is anything but perfectly straight, it will wobble when it spins (with the end result being a lot of noise). So, when removing the motor, be very careful not to bend the spring/worms. Once bent, it's sometimes possible to re-straighten them by very carefully applying pressure in the opposite direction of the bend.
The second problem is more serious - a design flaw in the secondary gears in the trucks. The gears pressed onto the axles (and the idler gears in the truck gearcase) have a dimple on them, resulting in a thin spot. As a consequence, the gears pressed onto the axles may crack at the dimple. You'll know if this is the case, because an S-2 with cracked drive gears will make a clicking noise as it rides the rails. You can usually identify the axle with the bad gear by holding the locomotive in your hand and gently applying force to the wheels. The wheels should not move, but if one does, it probably has a cracked gear (which is now slipping). NWSL used to offer replacement gears for these models (not sure if they still do - but the part number is/was 2152-6). Since this model is out of production, your only other replacement option would be to find a used one and cannibalize it for spare parts.
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