I had the same problem and had to do a little bit of work to get it to work. Here's what you do:
1. Open the Content Manager and search for blw con b2
2. When it comes up, right click it, move your mouse over Edit and select Edit in Explorer
3. Open Notepad, located under Accessories, accessed by the start menu on the bottom of your computer.
4. Write the following in the notepad (Note: TYPE EXACTLY WHAT IS SHOWN BELOW)
Primary=engine_black.tga
Tile=st
5. Save this to the blw con b2 file and name it engine_black.texture.txt
6. Install Gimp 2 on your computer. You need to do this in order to make engine_black.tga. Do some searching online to locate this program. This is my preferred program to make .tga files. YOU CANNOT USE PAINTSHED TO MAKE THE .tga FILE.
7. Make a black square measuring 64x64 pixels and save to "blw con b2" file as engine_black.tga
8. Close out the blw con b2 file, right click over the blw con b2 file in Content Manager, move the mouse over Edit and select Commit.
The red "!" will change to a yellow "!" and, if you do this right, the Baldwin medium 2-8-0H and Baldwin 2-8-0M should work.