trainguy4466I've always considered the difference between a train set and a model railroad to be how serious the layout in question is meant to be taken. If a layout is built just for fun, with no real basis in reality or era and only meant to be a place to display and run one's train collection, and doesn't partake in realistic operations, I would consider it to be a train set. If the layout has a definitive basis in reality, be it a prototype or a fictional railroad, and is built to represent that basis, and is operated in a fairly serious manner, than it is a model railroad.
Ouch
Alton Junction
I'd say if you take the trains and track out of a box, set it up and run it, then put them back in the box, it's a train set. Once you have some type of "permanent" set up, with benchwork (a table, shelf etc.) it's a layout. I moved a few years back, once I put in some shelving to use as benchwork, put in some Kato Unitrack and hooked it up to my Digitrax Zephyr and began to be able to run an engine back and forth, it was a "layout" as far as I was concerned from that point on.
Bruce Chubb wrote something years ago, don't have to book here for an exact quote but it was something like "once you stop running trains around and around, and do something like a real railroad would do, like stopping to pickup or set out a car at a spur track, you're changing from having a train set to having a model railroad".