I've got a friend, Jules, that lives near Birmingham, in the UK who has built two very small NScale Layouts. One in a suitcase and one in a picnic basket. If you really want to see what can be done in a small space, Go to Small World Layouts. I hear through the grape vine that No Picnic is for sale. If you live in or near Birmingham, I suggest you check it out, before Jules goes to EBay with it!
Bonus: The Ants will make great little people for the Picnic basket layout. What would a picnic be without them!