Why did Madhavrao and Dixit insist on traveling in the packed second-class train car with Baba's precious portrait? It seems like an unnecessary risk.

This is a slight misunderstanding of the events described in the text. According to Chapter 51, Madhavrao and Dixit did not actually travel in the crowded second-class car. When they arrived at the station, they bought second-class tickets but saw that the train was 'packed to capacity.' Faced with this, they became worried and decided their best option was to 'return to where they came from and go to Shirdi the next day.' It was only because a train guard, who knew Dixit, made a special arrangement for them that they were able to travel that night, and they did so comfortably in the first-class section.