Has anyone ever built a large-scale garden layout in which the little figural people have built their own identically-modelled large-scale layout in their own little garden?.
As Kevin said, making a garden railroad in a garden railroad using Z scale is not uncommon. The Mason Dixon G scalers, who exhibit at the B&O Museum at Xmas, have a module like that, with an extensive garden modeled with lots of euro trains - I have a photo somewhere. 1:10 is a reasonable scale for a ride-on garden layout, and there are some steam engines in Z scale. The ride-on scale for narrow gauge is larger - 2 1/2" scale or 1:4.8 - so an Nn3 steamer is a reasonable size. I have a photo of an Nn3 K-27 on he running board of a Fn3 K-27 somewhere.
There is also the T scale products from Japan, which are 1:450 ( http://www.tgauge.com/
) ( http://www.t-gauge.net/available.htm
) from Eishindo. This is a 1:22.5 ratio of T (1:450) to F scale. Unfortunately they haven't produced anything but electric/diesel locos.
Intriguingly, Eishindo (I think) produced a version of their tiny diesel configured as a ride-on model, along with some large scale riding carriages. It was sold as a fairground attraction train, I think. But it was O-scale ? Still close enough to be usable.