Blue? Wouldn't black be more realistic. Ah, what do I know about trains, anyway.
In any case, it depends on how your smoke mechanism works. I imagine it's sort of like just boiling the liquid, thus the "smoke" that actually comes out of the engine is more like steam. In that case I guess it would be best to use a blue dye, but I'm not sure of any volatile enough for that application. Finding a nontoxic one shouldn't be too difficult, though.