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Of course you can build a fine layout on a 4x8 sheet of plywood! that's how just about everyone gets started in the hobby. Since this is your first layout, I suggest you use sectional track, it comes in all shapes and sizes and it's easy to work with. As for the passenger train thing, I suggest you keep the curves as broad as you can (the largest you can do is 22" radius) so the trains will have no problems crossing them (that is, stay away from 15" radius!) Just for curiosity, do you have a theme in mind for the layout or do you only want to run a train on a loop?
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