this is pretty much the plan for the layout, still have a few bits to work out - it's not so much the L&HR as it is the Connellsville extension of the WM. in 1973.
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Chessie.
One issue with this plan is the staging is not flexible. Trains can only enter or exit in one direction. A "through" train could come out of staging, do a lap around the layout, and then it would arrive back at the diamond crossing facing the wrong way to go into staging. It would have to back in as it has nowhere else to go.
Dave's track plan would actually work pretty decently for an operating layout. The double ended staging makes for something that can be run as a point-to-point with staging at both ends or run roundy-roundy through a clear track in the staging level. And a train heading up the branch needs to traverse most of the layout if it originates in staging. If you base it from the junction, then maybe a couple more tracks could be added at that town to allow the through trains to pickup/setout cars and the branchline engines to park (unless they're based at the terminal end of the branch)