My vote would be for the 4-4-0 rather than the 2-6-0.  To the question about the numbers, they refer to Baldwin's shop code for locomotive designs back in the 1870's and '80's.  I don't recall all of it, but the letters refer to the number of drivers - C for four drivers, D for six drivers.  I believe the other numbers are related to the weight and other factors. 

Isn't it amazing what just a little bit of scenery will do for a layout?  Good stuff, Jonathon.

The turnout number refers to the angular spread of the diverging route.  A number 4 turnout opens up 1" for every 4" of run, a number 5 opens up 1" in 5", and so on.  Tight, compact layouts using 18" curves can use No. 4 turnouts to save space.  Larger and longer equipment likes higher numbered turnouts. 

The issue for me here is that the driver size on the Connie is about the same as on the Mike.  Most of these vest-pocket Mikes had drivers in the 52 - 56 inch range.  For me a better start might be one of the old MDC/Roundhouse Old-Time 2-8-0 kits.  You would need to do some work with rear frame extensions and stretch the boiler, but that would be one approach. 

What's missing?  I don't see a smokejack for a car stove. 

One of the manufacturers selling points for diesels is that you can M.U. whatever horsepower you need to get the train over the road with only one crew and limiting or eliminating helper service. 

Jonathon:  You probably have already done this, but a search in the Rails Northeast photo file shows No. 4508 with a big Vandy tender, either from an S-1 or an EL articulated.  I'm going to try and locate a Rivarossi tender to do this exchange, just to be different.  I used the same tender behind my Westside Q-4 instead of the stock tender.  For DCC, I cut out the cast-in coal load to gain access to the interior, replacing the load with a removable carved foam load covered with real crushed coal. 

Check to see if there is any packing material stuck behind the pilot or trailing truck.

Another option to consider is a switchback design.  Switchbacks were common in logging and mining.  The loading area can be on the upper level, then switch back down and back to the terminal/interchange location.  The Bachmann Shay and a few of the four-wheel dump cars would be just right for this type of operation.

I think what Bear is saying that you print the black portion of the NS on white decal paper to achieve the effect.  But you are correct, since the disappearance of the ALPS printer system, I have seen no option available for printing white lettering from an inkjet or laser printer onto clear decal paper. 

Just for reference, I began my layout more than 25 years ago.  It is principally On3.  Back then, On3 flex track was somtimes hard to get and relatively expensive. Also, there were no pre-fab turnouts available at all.  All of the visible narrow gauge track is hand-laid.  The main line is Code 100, the sidings Code 83.  These work out to about 95 lb. rail and 65 lb. rail, respectively, in O scale.  For the turnouts, I bought HO point-frog kits, lengthend the closure rails and made new throw rods to widen the gauge.  The hidden track is flex. 

The connecting standard gauge line is all Atlas Code 148 flex which for me is OK becuase it represents a heavy-duy class 1 main line.  Weather up the ties and paint the rail sides and it is just fine to my eye. 

As I noted, Roger pretty well summarized the hand-lay process.  As for laying the ties, some folks pre-stain them before gluing down.  To me that was a bit of a pain, so I glued the raw ties down, let the glue set well, then brushed on a stain using thinned, alcohol-based leather dyes.  They dry quite quickly.  Then I used a long sanding block to dress the tops of the ties level, and touched up with a bit more stain.  Lay the rail, spread and glue in the ballast, and you're set. 

The primary reason a lot of modelers hand-laid track in the past was because the available commercial track (either sectional or flex) was not very good-looking.  Code 100 rail, oversize black plastic ties, gross rail attachmets, etc.  Roger well describes the usual hand lay process.  In the past 20-odd years there has been a great advance in commercial track - correct tie size and spacing, good selection of rail sizes, very fine rail attachment.  These days, unless you really want to hand lay, the commercial stuff is just fine and can get you going quickly.  These days, the hand lay fraternity is pretty small except maybe in the specialty choices like narrow gauge and traction.

You can usually tell visually where the insulating bushings are - normally between the axle and the wheel.  If it isn't obvious, the brute force method is to clip one lead from the power pack to an axle.  Turn up the throttle and brush the other lead on a wheel.  If it sparks, it is not insulated.  If it doesn't spark, insulated.  If you have a VOM meter, use the resistor setting to check continuity. 

Most all sandpapers use natural sand grit.  Iron, in its natural variations, is a very common inclusion in natural rocks.  At the very fine grits we use, those little bits can be attracted to a strong magnet.  As for finish filing of brass/n.s. rails, I've never had an issue with them.  Agree that ballasting should be about the last thing to do with trackwork, and if you do that well, the filings will glued down along with the ballast.

I believe that the power truck picks up on one side and the trailing truck the other, so the insulated wheels should be opposite each other between front and back