Walt indeed was a pioneer in the live steam hobby in the late 1940s. He had a 1/8 scale 4-4-0 American named the Lilly Belle (after his wife) and matching freight consist that he ran around his backyard in Holmby Hills, CA. The success he had with that railroad, entertaining people with a train in an outdoor environment, led directly to the creation of Disneyland in 1955.
This subject is definitely covered in great detail in Michael Broggie's book.