I think partially because the modders don't have to animate walk cycles and limbs moving, the train is mostly static. Also it's the contrast between horror and Thomas's squeaky clean branding.
He stands out instantly as out of place in a way that some other in-jokes might not. Hank Hill might not look super weird in Left 4 Dead; presumably a number of middle-aged Southern men with an avid interest in propane were caught in the zombie apocalypse.
Because of this, it's funny even if you don't know who Thomas the Tank is. I think this is part of the reason for Shrek memes persisting as well (in addition to Shrek's extremely dedicated fanbase).
I think this causes much less distress during youth because you've not been exposed to so many complex things with such regularity and over such a long period as you have later on, so you don't really unconsciously think "this is a face; no, wait, a train. wait, the bars on the wheels, they're kinda like where arms should be. are they arms? no this is a train. no ears, no hair, this is not really a head. Of course it's a train, but it's smiling. so it has a mouth, but no limbs, how does it eat? is someone and feeding it with charcoal by entering it from the back where the butt should be? WHERE ARE THE VISCERAS?"
Just regarding the face, it's kind of like the comment says in this video[0], somehow at 3:19 they're ok because they're abstract enough, at 4:02 they're fully entering the unsettling uncanny valley, but at 5:55 they look fine. And here you can fully extrapolate a matching body in your mind, but not with that hellish train, where the extrapolation projects such a body onto the train thing (and the other way around).
tl;dr trains with faces are creepy
This reminds me of one of my favourite Cyanide & Happiness comics:
A Gingerbread man lives in a Gingerbread house. Is the house made of him? Or is he made of house? He screams, for he does not know.
Stephen King's The Dark Tower spoiler below:
Stephen King's masterpiece "The Dark Tower" series has an intelligent AI in the third book called "Blain the Train". The dark tower series starts off as a kind of medieval Western in some barren dessert world and pretty soon there are doorways to parallel worlds and times like New York City. One parallel world was once populated by a society that is probably a few hundred years ahead of us technologically speaking, but they were warlike and killed themselves off. All that is left is Blaine the Monorail and Patricia the Train and they are super homicidally insane. I've been scared of Thomas ever since.
"Part of it, perhaps, is that Thomas and his world are innately horrendous, and there’s something horrendous about taking all that off the rails and into a digital space. The original books, penned in the 1940s by the Anglican reverend Wilbert Awdry, now read like an enthusiastic allegory for bigotry and exploitation. The New Yorker, among other publications, has a ghoulish piece of essayistic fiction on the drizzly dystopia that is Thomas’s Island of Sodor, where cheerful anthropomorphic machines are torn apart, worked to death or bricked up in tunnels at the whim of a well-heeled Fat Controller. For all its dark corners and clutching cadavers, Resident Evil 2’s setting can seem almost benign by comparison."
Cracked also articulated it well:
https://www.cracked.com/article_19673_6-insane-but-convincin...
(Another show with cheery, brightly colored human-machine hybrids existing in a highly regulated totalitarian structure is Teletubbies, although it's more of a Brave New World to Thomas's 1984. You do see creepy Teletubby "cursed images" from time to time...)
https://ttte.fandom.com/wiki/The_Sad_Story_of_Henry
This particular episode horrifies me; I feel like kids will grow up and as adults, look back on this and wonder how they didn't realize how dark it was, much like I do with some parts of things like The Brave Little Toaster.
"But I think he deserved his punishment. Don't you?"
Edit: Oh, it's actually from the very first book published 1945.
...speaking as a father who used to take a book with me to read when my daughter used to throw herself to the ground and refuse to walk any further.
He still has the blocks, but poor Thomas is no more.