I have a whole playthrough of the first several areas, including this whole section:
This requires making it past the sawmill, and then entering the trainyard.
1. After moving the train to the right, then left, you will have the crane in place over the floor hatch.
2. Use this to lower the engine down into the boat.
3. Throw all the trash down the hole for fuel.
4. Jump down and push the engine down into the boat, installing the engine.