I've rewired a couple of old Lionel locos using repro cloth-covered (and rubber covered, inside the cloth) single-strand wire. Black cloth. Available from Jeff Kane at the Train Tender, and likely several other sources. Jeff sells multi-strand wire, too. But I find the single-strand stuff easy to work with.
That said, many guys use commonly available wire from Radio Shack, relatively thin gage. (Don't remember right now, but maybe 22-gage???) The nice thing about wire from the Shack is that you can get the same wire type in several different colors ... yellow for wire to light, red for wire to/from armature, etc.