Nice example Tony. That Bachmann A2 could have been used as a toy (by the six-year-old I mentioned above), but instead it received the individual skill and creativity that, to me, makes a model. (Which, as you say, can be applied to RTR, as well as to a kit or a scratchbuild).
So they're not totally different things - ends of a spectrum perhaps?
I don't think applying 'model railway' rather than 'trainset' to Little Bytham would be pomposity, accuracy rather. If anything is a model of a railway, rather than just a set (collection) of disparate train related bits then LB is.