If you shrink the stock down to suit the track gauge, you end up with H0. There have been several unsuccesful attemps to move the 00 market to H0, so I think that is a 'red herring': it is not going to happen. Sticking with a scale of 1:76.2, if you want a perfect scale representation of track with a gauge of 4' 8.5" then the only way forward is to model in S4. However, perhaps think of the current debate this way.
Prototype track in the UK originally used a sleeper length of 9'. It was subsequently realised (around the time of the First World War) that a cost saving could be made by reducing the sleeper length to the now standard 8' 6" on the basis that not all of the timber outside of the 'four foot' was actually required. Now imagine if the universally adopted gauge had been 4' 1.5" rather than 4' 8.5" (and the 'four foot' a bit closer to four feet). Under such a scenario, it is likely that 8' long sleepers would have become the norm over the UK rail network and as such, this is what we should be seeking to model. However, all of the other dimensions like sleeper width, depth and spacing would be the same as track with a gauge of 4' 8.5". I think on the whole that is where the greatest consensus lies. It is all of the other options such as bullhead rail or flatbottom, 00-SF or something else, where there is greater disagreement among any prospective buyers on here.
Sleeper length is always going to be an issue with an incorrect track gauge. When laid adjacent to a straight platform, the centreline of the track has to be a specific distance from the platform edge. This distance is the same irrespective as to whether one is modelling in 00, EM or P4 because it is based on stock clearances. However, the distance between the platform edge and the nearest running line will be greater for 00 than for P4. If the sleepers are anything less than a scale 8' 6" then the same is true with regards the distance between the platform edge and the ends of the sleepers. Therefore, when shortening the sleepers, you increase the gap between the platform and the track. A balance has to be struck, and personally, I feel that an 8' long sleeper is the right balance.
I'm therefore in agreement with Martin's suggestions.
Regard
David