Thanks for great advice. It's given me some leads on reducing the heat, but first check if its the motor housing or the Darlington transistor that's getting warm when running. ESC has worked fine for 38 years and haven't noticed any lag but there again it's the only model I've ever owned. Guess the new Li-ion battery can sustain a higher voltage that lasts longer compared to the old NiCad. Remember Darlington Pairs and MOSFET's from my Electronics training back in the late 60's (and also from my other hobby, Hifi). I have never had any interference on 27MHz and models have moved on, as has CB Radio. Don't fancy changing out the whole electronics chain.
Edit:
I've decided on what action to take to reduce heat to Motor/Transistor.
1. Replace Wheels/Tyres/Bearings - they need it anyway.
2. Replace 7.2V Lithium Battery with 6V Lithium Battery. I can get one from the same series which uses the same charger. I think reduction in voltage will reduce current through transitor and 6V battery can also power electronics instead of current set up of 4 x 1.5V cells.