Just a thought, as I finally get to planning my own layout, which will be roughly in the same space as yours (mine is more like 10x12 roughly). It is hard to meet all the requirements we might want in a relatively small layout, for example having a yard or something like an engine facility with turntable).
One of the things I have been thinking about is using stagecraft to allow me to have elements I wouldn't have space for. For example, if you want to have coal hauling capability on your railroad, to have a mine modelled takes a lot of space. Yet you could do something like have a painted backdrop at the end of a siding, and have the tipple portion modelled over the tracks physically (compressed likely), whereas the rest of the mine complex could be represented with a painting of the mine complex and/or a flats of the buildings on the backdrop (I am no expert on mines). For something like logging, a painted backdrop behind a partial mountain covered in trees with a portal to a staging track (looking like a tunnel through the mountain) could represent a logging area, basically a train would go through the tunnel portal to the staging area with empty flat cars, and come out with loaded flats with lumber. It isn't the same thing as a logging branch with geared engines and a logging camp and the like and an interchange to it, but it allows you to get the flavor without taking the space (nice part is you could have a staging area behind a backdrop and at one end of the backdrop have the mining scene, and the other the logging 'portal', sharing the staging area). Like you I also face the dilemma of having some engines that require at least O72 in a relatively small space
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