Electronic – LM317 based power supply with current limiting

Consider something like this kit from Apogee. It's linear, has adjustable current limit (i.e. important) and meets your budget, as long as you can live with 3A for the time being. If you go bigger, you can get 5A but you're looking at closer to $300.

You can also keep your eyes open on online auction sites for used industrial equipment like the HP6038A (60V 10A) or the 6Instek GPC-3060D (dual 30V 6A, can be paralleled).

The LM317 is a linear regulator, which is really inappropriate for significant power, like what a model train requires. You say the train draws 300 mA. That means at 3.3 V drop accross the regulator it would dissipate 1 W, which would require a heatsink.

I'm not sure why your regulator is dying. I thought (haven't checked) that the LM317 has integrated thermal shutdown, so it should shut itself off if overheated. Perhaps it doesn't. Check the datasheet.

In any case, a switching power supply is the right answer. I am actually working on a product right now for the model train market that includes a track power supply. I am starting with 48 V. That gets bucked down to whatever the user selects as the track power supply voltage, then a separate H bridge circuit implements the polarity flipping for the DCC protocol. I can dump a few Amps onto the track and the board gets warm, but not hot. Once this becomes a product, the schematic will be made public. If you really want to see what I have so far, I can make it public unofficially, but I don't like showing internal designs until everything has been worked out and properly tested.

On a separate note, why not use DCC? That completely gets around the problem of "sending one of the trains in reverse due to the common rail".