Kato drives are better then any of Protos, some of the later Proto drives actually resemble Kato drives to point (for that matter Athearn's does too) The Kato drive is usually much smoother runing, more tollerant of durty and poor trackwork, and more powerful.... except when compaired to the Proto 60 series drive which is downright frighteningly powerful.
That said, Kato's electrical systems havent always been the greatest, the SD40-2's suffered from a problem with a poor metal tab pickup design. The SD80MAC's had a problem where a metal tab on the circut board was not cut to proper length causing a short and giving some DCC users issues, Almost every Kato board design has had a problem with resistors and diodes failing prematurely.
Proto's problems mainly revolve around the fact that no two units are geared the same, creating issues for DC users who want to run models together. Proto also has a problem with gears cracking over time, expecally with the early GP series drives that were simular to the athearn drives. Proto was always good about supplying replacment gears.... untill Walthers bought them. Thankfully Athearn gears are a drop in replacement. Proto for some reason uses low voltage lamps, Not DCC friendly. which means you either have to install resistors, replace them with higher voltage lamps or LED's, or use a special decoder. So while protos usually have the 8 pin plug, they are not 100% DCC ready. I'm also seeing a problem where older proto frames are starting to degrade, recently I had a E8 frame crack in half. About a year ago a club-members E8 did the same. Im not sure what to make of this, it might be just a bad batch, or wierd ironic event, or it could be a potential problem.
On the shell side of things, Proto is far more generous on detail parts then Kato usually is, Proto like most manufactures uses see though fans, and in some cases see though radator grills, and dynamics. For some reason Kato is still stuck in the stone ages in this department, Making units without the said items. Protos handrails and gribirons are closer to scale then Katos, but at a cost, they are also more fragile, but on a positive note, they usually come pre-installed, something Kato still isnt doing. Protos downfall in the shell department is sometimes they produce parts out of proper size, or miss certant details entirely. The SD60's cab and nose were of incorrect dimensions, and the trucks were far too wide. The GP38-2 is missing the door on the firemans side of the paper air filter box.
Paint wise its a toss up, Kato did a fantastic job on the SD80's, but a horrible job on the SD40-2's, Proto has had there good and bad jobs, that said I tend to find there paint a bit on the thick side. My GP38-2 has all kinda wierd paint mistakes.
I currently own 4 Katos, 3 SD80MAC's and a lone SD40, and 6 Protos, 1 GP38-2, 1 SD9, 1 SW1200, 1 SD60M, 1 E8 and a GP9
Out of all of them the SD80MAC's would have to be my favorite and also probily Kato's crowning achevement, they run well and are very well done. The fact that Kato went the distance and did a model of which only 30 exsisted correctly is very impressive, many manufactures would have probily not done it, or attempted to pawn off a slightly modifyed SD9043 in CR/CSX/NS paint.
My favorite proto would have to be the SD60M, its not 100% correct for CR but it is the only RTR model produced to date of the 60M, even with its detail flaws its still a very nice locomotive. I was working on a RPP one before I got this one but have put that aside now, anyone want a RPP SD60M shell and chassis?
My least favorite out of the bunch would be the GP38-2, Even with the revisions after the initial run (which was dreadful) theres still alot of glaring mistakes to be had. Its also managed to go though 2 motors for some reason.