[Skye]

There is such a thing as "light rail" though. Lighter tracks, lighter trains, and cheaper construction.

Also if you want small trains, just look at the UK. Normal trains here are much narrower than normal US trains, they are about as wide as modern trams! And the London underground has trains that are tiny and shaped to make the most out of circular tunnels.

You don't need to rethink the entire system for the points you've raised there...