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Joe, The toylike issue comes up when the grade is seen next to objects that are level. Buildings are hard to put next to a steep grade because either the building looks out of plumb or the grade looks real steep. Another situation is where there is another level track above the grade or below it where the eye can see both at the same time. This will make the steep grade look "funny". As other posters have pointed out, this is a subjective issue. I had steep grades on my last layout and am keeping to the 2% rule on my new one because of the toylike issue... While others have mentioned that the prototype did occasionally go steeper than 2%, it was rare for class1 railroads to have much real steep trackage (I know there are exceptions, but most are in the 2.5% range, not 5%)). I think that when you see a model with real steep grades, you reference back to what you have seen on the prototype ( mostly flat or slight grades) and the incongruency causes the scene to read a little toylike. This particularly true if the equipment seen was was used on flatter grades on the prototype. Shays, etc. will look more at home on steep stuff than big mainline steam.... This is something you might want to experiment with and see how it looks to you...
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