Can't advise about Traction Engines in particular but I guess we all approach new projects in much the same way by studying the plans, or a real one, and asking 'how could I make that, or can I buy one', 'what tools do I need', 'where can I get the materials' and 'have I got enough money, time, space and the necessary skills?'
With time and skill it's possible to make many objects with hand-tools only, but the process is painfully slow. Of course there are jobs for which bought tools are all but essential. Of these a screw-cutting lathe is the most important, and – maybe with some ingenuity – they can be used for dividing, slotting, drilling, precision boring, lapping, milling and other operations. Huge but! Although lathes can do lots of stuff, specialist tools like milling machines, pillar drills or shapers are far more convenient. The guy with a big workshop full of tools will run rings round modellers who have nothing but a Super Adept under the stairs simply because he saves so much time.
The size of the finished object is a consideration. For example, the swing of your lathe puts a limit on the maximum diameter of any wheel cut. Likewise the spindle bore and length of the bed restrict what can be done.
In my general purpose workshop (bandsaw, grinder, bench+vice, mill, lathe, compressor and hand-tools galore), I probably have the wherewithal to tackle a small traction engine already, apart from the boiler. I don't have a big enough torch or the requisite skills to make one without spending a fair amount of dosh on gear and then learning how to use it properly. My best bet is probably to have the boiler made for me.
As hobbies go, model-engineering isn't outrageously expensive, but finding the cash is difficult enough to slow most people down. I guess most model engineers build their workshops and skills up over time, not with a big bang. As usual much depends on the individual. I like to take things slowly, buying tools as and when needed, saving up if necessary, and slowly learning my trade by starting simple and gradually tacking difficult work in graduated stages. Others like to jump in at the deep end and are motivated by overcoming serious challenges. Over-confidence has been the ruin of many a prospective engineer. Workshops full of abandoned projects, money and time down the drain, and total demoralisation of the enthusiast.
My recommendation is to start small with something like Stewart Hart's Potty Mill Engine. Actually making things is a valuable teacher. Suddenly the need for other tools and new skills becomes obvious, as does a feel for how long work is likely to take in your hands. I reckon Jason works at least times faster than I do and gets a better finish. Can't blame my tools, we have similar equipment…
Dave