I think the answer is "both." Creating a model world that causes you to operate like a real railroad, IMO, gives most adult modelers the most play value. But that doesn't necessarily hold true for youthful modelers. If the equipment had been readily available back in Frank's day, I bet he would have included operating bridges, lumber yards, cranes, etc. to hold the youthful modeler's interest, all while they learned how a "real" railroad operates (scheduling, servicing customers, servicing equipment, etc.).
But, if I remember correctly, Frank also built in some hidden connections for the times he (and visitors) might have just wanted to see some trains run.