Personally I cut them off and never intend to put them back. Here's the why:
#1 MTH never used a sleeve ever and arguably smoke more volume than anything Lionel ever made to date.
#2 Lionel newer smoke units started copying MTH and do not use the sleeve and use instead a pillow or pad of fiberglass wick not unlike MTH.
Smoke requires a few things, one is heat from the resistor, one is fluid wicking action to bring liquid to the resistor but NOT block airflow, and last, raw airflow through and out.
All you have to do is look at one of these wick sleeved resistors after being in operation for any amount of time and you'll see the problem. The sleeve holds the heat around the resistor allowing it to get too hot and burn and char. Then it prevents the wicking action, so now dry, the resistor gets even hotter.
I apply this basic advice and principal to every single engine I own and or work on.
#1 Remove any sleeve or wick smashed in between resistors as seen on MTH units. Bottom line, a bare resistor with airspace for the rising smoke in the housing to flow and go out the exit hole.
#2 Use good clean wick material spread the fibers to make it fluffy. Make a folded pillow of this material in the cup of the smoke unit and ensure the shape of this doesn't block the incoming airflow from the fan or in a puffer, from the air holes. This is the wick I am using and I cut about a 6 inch piece, then unbraid it and fluffy it, and then fold into a little pillow. 1/8 5’ Buy 2 Get 1 Round Fiberglass Wick Kerosene Lamp Tiki Torch Bottle Oil USA | eBay
#3 Use MTH brand uncented smoke fluid and saturate the wick material before final assembly. Here, with the unit open, apply liberal amounts of fluid to the wick, bu obviously do not flood the cup. The idea is the wick material can retain the smoke fluid even if turned sideways or upside down. You want it wet, but not run out of the cup wet. I've tried all the smoke brands, side by side, same resistor, same wick, same fan, MTH will produce clouds of smoke and not burn and char the wick, not give off chemical smell, just nice big clouds of white smoke.
Again, the keys are:
#1 above all else, airflow through the unit. Nothing, not wick, not the resistor should restrict the airflow.
#2 The idea that the wick material needs to surround or wrap around for more contact with the resistor normal end up in charged wick and blackened resistors. By the resistors pushing into a soft pad of wick on the bottom, this allows good wicking action and the smoke rises n the top side of the resistor facing the top side of the unit and the resulting airflow out collects the smoke and pushes it out the stack.
Each person has their way, and I'm not saying mine is the right or only way. It's the way I do it and it works well for me.
Also, if talking post war typical modified or even later original liquid units, all the way to even modern Lionchief puffers, I find the typical wick material used is not great. Much of the originals is a yellow fiberglass, looking like it was cut from insulation from your house. My theory is the yellow is social coating as used in house insulation and as a smoke wick, that leads to bad smells and burns shared wick material. The other white pad kind I see that both the factory used and some replacement aftermarket upgrade kits are selling with are just as bad. the white pad is too dense, doesn't properly wick, and just ends up charring too. Not to mention it flakes when you do a teardown.
Again, the rope wick I posted above can be cut and unbraided, then fluffed up into a nice little pad and IMO, works better than any other solution and way better than even replacement wick for Lionel.
Also, since you have a smoke unit open, some caution.
Lionchief engines, and a lot of modern engines do not ground the resistor to the cup or frame ground. Ensure, and test with a meter to make sure you do not short this type to frame ground or the cup when putting these back together.
Old post war engine use the frame ground so one side is grounded. However, same rule, on a TMCC engine, if the power side shorts to ground it will blow a triac on a R2LC board the first time they power up.
In other words, if I was insulated from ground when you started, make sure it's that way when you are done.
A great video and where I learned from, and then came up with my own variations.
Second video also covers drilling the air intake hole on Lionel fan driven units (another thing I do specific to Lionel units when working on them). MTH units generally do not require the step and already have massive air intake holes- hence why they smoke so well.
Again, parts of these techniques and tips can be applied to almost every brand of smoke unit, be it a K-line, old Lionel, modern Lionel, MTH, or whoever. Air flow is key, good wick is key, a clean resistor that is not all charred up, and last, don't short it when you put it back together.