Raised on the Erie Lackawanna Mainline- Supt. of the Black River Transfer & Terminal R.R.
I would think that you could use a router, or drill a hole and then use a sabre saw. It's going to make a dusty mess either way, though, so this is something to do before you lay your track. If you end up with a slot all the way through the plywood, take a piece of plaster cloth and cover it up. The plaster cloth can then be shaped into a U-shaped or V-shaped channel while it's still wet, and it will dry with a good base for scenic stuff. I put a thin ditch between two tracks in my yard, and then added "dirty water" with tinted Envirotex. I put some tall grass and other scenic cover around the edges, and it came out very well.
I originally laid my yard with full-height roadbed. It didn't look right at all. To keep everything level with the yard leads and main line, I filled in the space between the roadbed with Durhams Water Putty to get a flat yard. This isn't a great way to plan a yard, though, and I would have done it differently if I hadn't already laid all the track and roadbed before realizing the mistake. The putty, by the way, dried very hard and would be almost impossible to carve features in.
One thing that might work for you is 1/4 inch poster board. It is a foam material, but a different kind, and the surfaces are covered with paper. It comes out about the same height as roadbed. It's easy to cut, so you can put in ditches and gullies very easily.
I've also added a few small rock castings to my yard. These look like small pieces of ledge sticking up through the soil, and they also help get rid of the too-flat look.
It takes an iron man to play with a toy iron horse.
I have used a router and a grinder. It makes a huge mess and is hard on everything around the work. I would never try it on 1/2" I have used the cookie cutter method and it works pretty well. I have some on this layout. I have used screen and plaster, but plaster cloth is easier. Butcher paper works well also, though I have not tried it. That is one of the reasons I now use foam for everything.
I might add a couple suggestions and observations. I was working in Columbus a couple months ago and found myself eating lunch at one of the large yards. Some of the things I noticed were that the yard is not flat at all, from side to side, end to end, and even from track to track. There were grades that had to be approaching 3%, but only for a very short distance, like 100-200ft. From side to side, some tracks appeared to be level with surrounding tracks, then had a service road (depressed) and then several more sets of tracks at a lower elevation (maybe 2-3ft). This really doesn't jive with most yards I see in pictures, where each track is precisely 2" apart, straight and flat. This might be alleviated by using the sheet cork with different thickness in different widths and lengths, sometimes even having 2 layers to shape a grade. As for drainage ditches without the mess, try using a sharp wood chisel. If you think you are going to go deep, glue a "patch" piece of plywood on the underside before carving it up.
I should think that there wouldn't be a lot of drainage ditches in railyards - they'd be a real safety hazard for the workers on the ground. Most of the yards that I've seen are underdrained, with open ditches, perhaps, on the perimeters.
You can use scenic effects to simulate subtly different elevations, as shown in the photos below. Different ballast colours and types, along with weed and grass growth, can suggest slightly different elevations where none actual exist. All of the tracks shown are laid directly on the plywood, with no roadbed whatsoever.
Wayne
The photos I've seen of flat-switched yards, especially in the steam era when there was lots of foot traffic in the yards, suggest there were not deep depressions between yard tracks. If you do want some modest changes in level ( few scale inches), seems like laying the yard tracks on cork sheet, then cutting away cork between the tracks, would be a better choice than going at the plywood between tracks with a router after the track is laid. That sounds like a recipe for disaster.
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Thank you, Capt., for the kind words.
I recenlty bid on a railhead project that took a single track and diverged into a four track yard. I'm new to the forum and haven't posted a pic yet, but I am very easily able to scan a profile plan sheet showing the ditches and slopes between a "flat" yard track. It has storage staging along one side and an access road down the other side. Anyone can PM me or respond to this and I'll send it to you. Jason