747, A dremel is not the tool you want to use for drilling holes in steel. Thin Aluminum may be OK with a small, 1/8" or less drill.

The motor will heat up

When you have to much of a load, it may thermal protect shut off. In this case, it is protecting it's self from buring up

Drill bits will dull with wear, or miss use. Using a Dremel to try to drill steel would classify as miss use. A drill wants to cut between 0.005" and 0.010" per revolution. They should be lubercated when cutting something like steel, or aluminum. Not being able to provide the power needed to get the drill to bite into the stock being drilled will just let the drill spin and heat up, distroying the cutting edge. This sounds like what you are running into. Running it faster only creates more heat. If the drill is not throwing s spiral chip when drilling steel, it isn't cutting properly. You need a drill press, or at least a good power hand drill to do the job.

If you cut into the wood in the engine compartment, it is a good idea to coat the exposed raw wood with a thin coat of epoxy. As you supected, fuel and oil will get into the balsa and soak in. This weakens the wood and eventually causes the glue joints to fail. I always coat the entire engine compartment and holes leading into it whith an epoxy finish. I use Devcon 5 minute epoxy and after mixing it, I thin it with denatured alcohol at a rate of about 25%. IE 1 oz of mixed epoxy would get 1/4 oz of alcohol. This is the hardware store, paint department alcohol, not the drug store varity. I use an acid brush to paint on the mix. Again these are avaiable at the hardware store in the plumbing dept. I use them because they are cheap and with the stiff brissles, I can work the epoxy in to the corners better. I usually throw away the brush after using it. Just remember, the epoxy will still kick off in about five minutes, so work fast.

Don