I actually found myself in the same situation you're in right now not too long ago. Trying to decide which scale you want is really a matter of what floats your boat, so here are some of my thoughts on the issue:
1) To being with I'd forget about filling your railroad room with a layout at this time. Start out with a switching layout! In a little as 1ft x8ft you can have a lot of fun with both scales. The advantages to this are twofold. First, the experience you'll gain from building a small layout is very important because it takes all the same steps to build a small layout as it does a large one. I would suggest building two switching layouts. One in N scale and the other in HO. You don't have to have a lot of equipment in either scale (at the least one engine, with 10-20 cars) and you can use the same control unit for either (DCC or DC). Second, you can always integrate a switching layout into a larger layout at a later date if need be. Plus there are tons of already generated track plans out there for switching layouts, so your time from planning to building and running can be rather quick. Plus you're not out a terrible amount of cash if you decide what you've created isn't going to cut it.
2) Decide what it is you would rather model: trains vs. individual cars? With N scale you can have a lot more railroad (i.e. train cars, yard space, etc.) in a given amount of space. With HO you won't have as much equipment however the level of detail you're capable of attaining with HO is much greater (not to mention the variety of scenery accessories is much more diverse – trucks, cars, buildings, detail parts). If you want modern cars of trains 15-20 cars long in the sort of space you're talking about then you'd probably have to go with N Scale. If however, you're modeling something older (with shorter cars) then HO might be perfectly fine.
3) Equipment availability/financial concerns: This is a pretty easy one - if nobody makes a lot of what you're looking for in that scale then you unless you're going to custom build/decal everything (which will ultimately take a lot of time away from layout building) you have to choose another scale. Also, If you already have a lot of equipment in one scale, it's usually not a good idea to just switch unless you have some way to sell those items to help pay for your new purchases. With the price of equipment and new sound equipped DCC engines, things can add up really quickly so it's better to start out small (i.e. a switching layout) then expand later vs. going all in buying equipment before you've even built any sort of layout.
4) Those around you: If you're fortunate enough to have fellow model railroaders living within your area or at least a hobby shop that stocks lots of railroad products then it might be wise to go with whatever scale they model at least when starting out. For one, it will be easier to shoot ideas and look for solutions with people who model the same things. Also, if you need a spare part or want to check out the latest product arrivals going to the local hobby shop will make your life much easier. Having said this, it's important to note the most hobby shops will primarily stock HO supplies and products and that means you'll have to go online for the majority of N scale stuff (excluding special or pre-orders through the hobby shop).
5) What the future holds: if you're going to be moving in the near future or might have an "addition" to the family, train space tends to change rather quickly so make sure you have a backup plan for what might happen if the layout that fit perfectly in your currently "train room" needed to fit in a space half that size. Would the layout you created still work? Will it fulfill your railroading needs (i.e. switching, yard operations, etc.)? Or could this give you an opportunity to try something new?
6) My experiences: All the stuff I typed above is based on previous experience, much of which I gained over the last two years while I attempted to decide for myself what scale I wanted to go with HO vs. N. Previously I'd moved a lot with medical school and the military so N scale was great because I could easily put a lot of layout into a limited amount of space (I built modular 1ft x 4ft sections, that could easily be added or deleted based upon my space restrictions). In doing this for 4 years I managed to acquire a moderate of N scale equipment (25 loco's and 150-200 cars). This was great, but about that the time I had convinced myself that N scale was for me Athearn came out with their "roller bearing trucks" and I just had to try that out. Getting rid of all my N scale stuff wasn't a reasonable answer so I left my main N scale layout intact and built a small HO scale switching layout (industrial complex model) to run the HO equipment on. This combination worked out great because it justified my spending money on an assortment of HO products, while still allowing me to get N scale equipment for what will become a more permanent N scale prototype layout in the future.
As luck would have it, I had to move unexpectedly two years ago and didn't have any room in the new house for a "railroad room" so my small "secondary" HO switching layout became my primary means of entertainment for this time - it just goes to show how enjoying two scales and smaller layouts isn't a bad thing. So figure out what it is you'd like to model, start out small and play around with both scales until one strikes your fancy or just fits better with your desired intentions. In the end, you'll probably like aspects of both scales all throughout your model career so just consider this a first step!
Hope this helps,
Erik
