The "Red-Eyed Engine" was a narrow gauge engine that Duncan made up in a ghost story.
According to Duncan, the engine lived on a narrow gauge railway. He was very different from the others, very mentally disturbed. His eyes were a glowing red, "striking fear at anyone who he looked at." He was basically the train form of Count Orlok, of the 1922 silent film Nosferatu, and Damien from the 1976 film The Omen, and its remake. The engine was too mentally unstable to pull passenger trains, so he worked at the slate mines. However, his behavior was very disturbing and unusual to others; he would purposely push trucks over a cliff and run over animals that strayed onto the line. Eventually, the manager decided he was too dangerous to be in service so he put him at the back of the shed, never to be let out again. One night, there was a fire in the shed and the cause was unknown. The firemen were too late as the whole shed was already in flames. The engine was destroyed, but not before giving everyone the devilish glare with his red eyes through the flames. Apparently, although he was melted, his spirit lived on. One night, two workmen claimed to have seen red eyes in the distance. The engines former driver investigated and apparently saw two flaming red eyes above him. When they went back to investigate, they were never seen again. There were several other reports of similar incidents. One claimed that the engine from Rusty's ghost story saw the eyes in the mist below before being swept over the side and into the swamps below.
Duncan told this story when the engines were all stuck in the sheds because of dangerous fog. The engines realized it was fake, but were still extremely scared for many days after. One night, when stuck at the sheds at Rheneas because of a falling bridge further down the line, Duncan saw a hallucination of the eyes and he was mentally disturbed and scared for quite a while afterwards.
The story that Duncan told was fake; the engine never existed. Whether Duncan did see something that night or not, on the other hand, was never determined. Also, the engine from Rusty's ghost story did exist. But the engines identity is a huge mystery.
- The Eyes (Appears in Flashback, Does not Speak, Not Visible to Audience)
- The engine was not visible to the audience to make him more more mysterious and scary. The only thing visible were his eyes.
- For some reason, when his flashback is shown, he seems to have normal red eyes. Yet when he is introduced after the title and when Duncan "sees" his eyes in the mist, they are recoloured cat's eyes.
- Despite not being visible on screen, the models of Rheneas, Skarloey, Smudger, Albert, and Sir Haydn were used to push trucks and create the smoke.
- Originally, his theme was going to be the main theme from the 1966 Western Movie The Good, the Bad, and the Ugly, but this was cut out at the last minute because it did not fit the scary theme of the episode.