Ed, the Disney story is not true. In fact Walt Disney’s backyard railroad was 7 - 1/4” gauge which was the standard for 1-1/2” scale.
The 7 - 1/2” gauge issue happened in the Chicago area. There was a 7 - 1/4” gauge railroad at a private home in Michigan. A Chicago area banker visited the line and was impressed with the size and heft of 1 - 1/2” = 1’ scale. He decided to build a locomotive of that size and he wrote to the owner of the Michigan line asking about the track gauge. Unfortunately the owner of the Michigan line, who was also a tinplate toy train operator mis-measured the gauge. In the tinplate world where they use tubular rails, they measured the gauge from the center of the rail head to the center of the rail head. This Lionel Std. Gauge tracks that are 2 - 1/8” gauge, were advertised as 2 - 1/4” gauge! So the Michigan owner measured to the center of the rails and came up with 7 - 1/2 inches! The fellow in Chicago built a beautiful Hudson type loco and other live steamers in the Chicago area built to 7 - 1/2” gauge so they could run on the bankers track. His line became famous and when the folks in California started to build to the larger scale….they wrote to the chap in Chicago for details. And that was the beginning of the issue.
Keith Taylor (former East Coast Secretary of the International Brotherhood of Live Steamers)