short answer: yes and no
from the most recent Wikipedia entry:
Thomas the Tank Engine: format and animation -
Each episode consists of a four and a half-minute (Seasons 1-7) or seven-minute (Season 8 onwards) story, told by a narrator.
The series was originally produced using moving models, seen at the time as the most effective way of realizing the stories without the cost and expense of conventional animation. The locomotives and other vehicles move, but people and animals are generally static. Stop-motion is generally used for instances in which a human or animal character is seen to move. In recent seasons, CGI has been used to generate smoke and other effects.
The use of a narrator removes the need to make characters' mouths move when they speak. However, their eyes do move by use of remote controlled mechanisms. The characters' faces are sculpted from foam rubber. Each character has several different faces to convey different emotions.
The models were initially built to the 1:32 scale, known in model railway circles as "Gauge 1". They used chassis made by Märklin with specially made bodies. As well as the eye mechanisms, these bodies also include smoke generators. Coaches and trucks were made using Tenmille kits. Models were later constructed entirely from scratch.
From Season 5 onwards, some larger scale models were used for the narrow gauge characters, in order to make it easier to fit the complex mechanisms into them while retaining a sufficient level of detail. In Season 6, the characters known as "the Pack" (construction machines) were also constructed to a large scale, and large models of Thomas and Percy were made to interact with them. Beginning with the ninth season, the Thomas model also interacted with the narrow gauge engines. It was joined by a large version of James in the tenth season.
It was announced that Thomas and Friends, along with HIT Entertainment's other franchise Bob the Builder, that newer series will be produced by Nitrogen Studios in Canada. The twelfth series of 2008 will feature Nitrogen's assistance in animating the faces of the characters, and in the 2009 season the series' production will move from Britain to Canada, and will be fully CGI instead of using models.