That's what we had when I was a kid...
We had an American Flyer train set up. Track was nailed down to 4' x 8' sheet of plywood. Had two ovals one inside the other and a couple of switches to switch the track back and forth. Also had a cattle car yard where area would vibrate and the cows would vibrate around (kind of like those old vibrating football games). Also had a milk car where train would stop at a spot on the track, door would slide open and man would slide out from car ejecting out a milk can. All of these items controlled from where the transformer was. I do remember having one or more trains that would smoke when you put drops of liquid in the stack.
I was too young to play much with it without supervision and my older brothers always pushed me to the side! I have most all of the trains, tracks and cars now but they are not in very good shape.
Here's a youtube video of someone else's milk car working!
http://www.youtube.com/watch?v=2KbUad3zNxQ
Here is link to someone else selling the cattle car setup on eBay that we had:
http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=320360034503
I always thought I would try to restore or put the train set back together on a fresh layout but never had the time or motavation to do it. If the gear was in better shape, I probably would have by now...