My first N scale engine was a Lifelike SW-8 switcher that came in a Yardmaster starter set. It is one of my favorite engines. It is smooth running, the graphics are crisp, and so are the details. I think they can be found for around $30. Mine will pull around 7 older cars or 11 newer free rolling cars on level track. The Jan/Feb issue of N Scale Railroading has an article on converting the wheelsets to NWSL. They can easily be converted to knuckle couplers.
If you want Kato quality, Atlas makes a Baldwin VO-1000 switcher.
Secret weapon, thanks for the tip on the worm gear