Done with small pieces of luan board and a bench sander. The line was done with a scribe tool. Same can be done to the outside of the rails, probably easier.
I used luan board and a floor leveling compound for most of the grade work. Green and gravel was added sparingly as a last process after all was painted a dirt brown. A relatively level diorama has a lot of small grades to deal with.
IMO, Mike CT 
Have fun with your project.
