It is very well possible to build a terminus station on a footprint of 4x1 ft. But you must try to keep it simple.
When choosing the right prototype it is even possible to build an actual location without too much compromises.
I have an example for you. Just took some pictures of my n gauge layout, a model of Blagdon station (GWR branch line terminus). Only compression is approx. 80% in length, everything else is according to the prototype.
I put my 1' ruler across the tracks, 12" mark exactly on the edge of the layout.
Layout is 4' long.
All turnouts are B7, radius of the rear siding is 2'
About the choice between n gauge or 2mm scale: you know you want 2mm scale, you have asked the question too often on another forum and VAG.
But let me speak for myself: my choice to build Blagdon to n gauge was a big mistake. Originally the layout was built with 2mm easitrac. It was my first attempt at trackbuilding and it was not very good. Track was not completely level, turnouts not everywhere to the right gauge and running was mediocre.
So I ripped off all track and started again with n gauge track to nmra standards so I could run stock right out of the box. Not... lots of modern British n gauge stock have flanges thicker than rp25 specs.
So I'm still looking for rp25 spoked wagon wheels but I haven't found any.
And then I started building a new 2mm scale layout for the diamond jubilee layout challenge. Never had such a smooth running layout. Seems I've learnt from my mistakes.
Would always choose 2mm scale now!
About the conversion of the pannier tank: why don't you buy an etched 57xx chassis kit from the association with bearings, muffs, wheels and gears? Motor can be added later if you succeed in building the chassis.
It is a replacement for the existing chassis so nothing is lost (except for the expenses for the chassis of course) if you don't succeed. But at least you have tried it then!
Have you already watched the videos on chassis building on the association website?
Jan
Edit: forgot to add that the 57xx chassis was not designed for the Dapol body so possibly some modification is necessary to match it to the Dapol body.