I like your ideas! Especially 'Mackinac Northern'.
DSS&A's Mackinac Division would be nice as well but I doubt that there is any DSS&A equipment available in Z scale and I want to go along with what's at hand.
The DSS&A was adsorbed by the SOO Line and they (the SOO) also bought the Milwaukee. So finding a GP 38 or SD 40-2 in Milwaukee paint in the eastern peninsula is nothing unusual.
A Milwaukee and CNW E8 would be another matter though. At least the Milw used them as far as Houghton and the CNW up to Ishpeming.
I don't know if there ever was an E8 in that neck of woods.
In the end it's my RR.
Thomas