Was the locomotive hijacking in Back to the Future III really needed?

They were looking for a direct solution that got them (or just Marty) out in a timely fashion. I don't recall if the gravestone photo was the driver, or if it was the simple fact of Marty didn't want to grow older in the past.

I know they were trying multiple solutions. If I remember correctly, while they were trying alternate fuels and ended up blowing out a part with high punch whiskey, Doc said he could repair the car, it would just take months. I don't doubt he could figure out a high octane process in that amount of time. A rocket sled would need custom parts in the same way, some way to harness a longer burning fuel for momentum... time to build, time to test, time one of them didn't have. The train already HAD all that, and a speed potential that just needed to be pushed. They wouldn't need to make one, just take one.

One possibility is that the people who wrote the movie's script either did not consider it, or decided it was either not feasible or not dramatic enough. My guess, though, is that it has to do with consistency of speed. In the various iterations of Delorean impulse, the constant factor has been getting up to 88 MPH and then maintaining that speed for a few seconds while the transport process takes hold. Steam engines and internal combustion engines (and presumably fusion engines) are relatively easy to finetune to stay at a consistent speed. Trying to adjust the fuel of a rocket, and to do so without blowing yourself up, is much trickier.

The schedule you are referring to does not only included the train, but also the fact that one of them will be killed the following Monday: as they start making arrangements, Buford is gunning for Doc, but as events occur, his target shifts to Marty. This puts them on quite a tight deadline (pun very much intended), as it gives them 3-5 days to leave.

Building a rocket propulsion sled and making/buying enough gunpowder to generate enough energy to propel the DeLorean up to 88 MPH would most likely take longer than the few (3-5) days they have left.

All in all, I think that Time was in short supply and that the train was the simplest and most reliable option available within the deadline.

It seems to boil down to two factors; Time + Money.

Marty and the Doc urgently need to leave town. We know from the pictures of the gravestones that either Marty or the Doc are liable to be killed in the showdown with Biff the following day. As you can see from the slightly longer 'final draft script', the doc devises a solution that will allow them to get the hell out of Dodge before then :

MARTY : Uh, Clint Clint Eastwood.

BLACK BIFF : Well, Mr. Eastwood. I'll see you out on the street Friday the 13th, front of the saloon. And you'd better be there!

MARTY : Yeah, right. When? High noon?

BLACK BIFF : Noon? I do my kilin" before breakfast 8 o'clock!

later...

DOC : Now. in order to get a steam locomotive up to 88, we need a long stretch of track on a downhill grade, which still exists in 1985. That's here — Carson Spur, which goes off the main line at this switch track and out to Carson Ravine. We'll load the DeLorean onto the tracks here, on Carson Spur. The train leaves the station at 7:57 tomorrow morning...

MARTY : Whew. I'm glad it's before 8.

DOC : Indeed. So: we'll hijack — uh. borrow the train, uncouple the cars from the tender, throw the switch track, and then we'll butt the locomotive against the DeLorean. You'll get in the DeLorean while I run the steam engine, pushing the DeLorean along Carson Spur. I'll open up the throttle, putting her into a full highball, climb to the front of the locomotive, jump onto the DeLorean and get in, in time to reach 88 miles per hour, at which tine Mr. Fusion will kick on the flux capacitor, generating the traditional 1.21 jigowatts which will send us back to 1985.

As to why they don't build a rocket sled, the simple answer is that they're in a hurry. Renting a train is also out of the question because regardless of their success or failure their plan will destroy the train's firebox and possibly cause an explosion. That's an expensive and extremely dangerous proposal that most train companies would shy away from, even if they were offered a pile of cash (which the Doc doesn't have).

Stealing a train is both quicker and free.

As Richard said I think the main issue was time, but I thought I'd add some calculations on how much gunpowder would actually be needed. The Tsiolkovsky rocket equation tells us that the change in velocity of the final payload is equal to the "effective exhaust velocity" (around 800 meters/second for a "black powder" rocket according to this) times the natural logarithm of the ratio of initial mass (including fuel) to final payload mass (with all fuel used up). Rearranging this equation, the ratio of initial to final mass would be e^(change in velocity / effective exhaust velocity). So with a change in velocity of 88 mph = 39 m/s, the ratio is e^(39/800) = 1.05, meaning the fuel must have a mass equal to 0.05 times the mass of the payload. A DeLorean with a full tank of gas has a mass of 1233 kg according to this, and the gas should weigh around 80 lb = 36 kg so let's say without gas it would be about 1200 kg. That means you'd need about 5% of that mass in gunpowder, or 60 kg (130 pounds). This might well be more gunpowder than local stores would actually stock at any given time, a poster here says that with a muzzleloader you can get around 70 shots per pound of gunpowder, enough for a fair number of hunting expeditions. Although this article indicates that the 36 barrels of gunpowder used by Guy Fawkes added up to about 2500 kg of gunpowder, or about 70 kg per barrel, so if there were some similar-sized barrels of the stuff around then it might be enough (not sure if those barrels were just used as supplies for cannons in the navy or if regular gun stores would have stocked them).