You'll want to start with a crumb coat. If you're not familiar with crumb coats, it's basically just a light layer of buttercream frosting necessary to catch your loose crumbs, which by this point you will have a lot of. Frost the entire cake without regard to how pretty it is, then let it crust (about 7 minutes).
I've included this photo to show you how I normally apply my colored frosting. I always use a bag, as it gives me better control. Upon filling in a space, I place my spatula under hot water, shake, then smooth over the piped frosting.
You'll see too that I used scraps to make the wheel covers... is that the right word?
You'll want to cut your dowel rod down, but I placed this in the smokestack to add a bit of support. I don't usually have to do this, but for whatever reason my cake appeared to be sliding, so this was a quick fix. Anytime you have a stacked cake you may have to dowel. Be ready for this by having dowels on hand just in case.
Here's an alternate way to decorate this cake. As I mentioned earlier, you'll find Thomas' look changes from one toy to another. On this particular cake I made the base black around the wheels. Some of the details are different too.