Dave, back before the 2nd world war, modeling in scales smaller than O gauge was in its infancy. Mostly held back by making a good electric motor small enough to fit in the boiler of the locomotive. Some manufactures saw OO, being slightly larger, as the solution to fit a better/larger motor. Many early HO models were of Reading Railroad locos with their huge fireboxes to burn the coal of that area, this allowed for motors of that era to fit. Josh L Cowen's Lionel company was out in the hotbed area for OO in the NY and NJ area. He was also influenced by Elliot Donnelley of Scale Craft/Scale Models who competed with Lionel in the O gauge scale market and had a nice OO selection at that time. Correct rail gauge to scale for OO is 19mm or 3/4 of an inch. This is what Lionel, Scale Craft, Nason and the others used. In the UK things developed different. With the typical UK locomotive being much smaller in physical size when compared to a typical USA locomotive, they were even more challenged to fit motors. So they chose the OO ratio but running on HO gauge track. I wish I had an HO NYC Hudson to put next to my Lionel ones, that really shows the difference in scale. I highly encourge you Dave, to check out and read this blog. It is very extensive into the history of all the companies involved in American OO and explains the UK OO more in depth to the why's and how's of their decision.
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