I have the same issues. My 4 year old and 1 1/2 old love the carpet layout. I hate them stepping on the track, accidentally punting cars... I fear for the buildings being sat on...
I tried a ping pong table at ping pong table height and the kids almost lost all interest.
I put the ping pong table on some heavy duty home depot medium moving boxes - about 16" off the ground. The 4 year old has a pretty good reach of the layout at that height. The 1 1/2 can get to the outside track. That got the layout off the floor and they can still interact with it, move the station and buildings and automobiles, change up their consists, load the cars with their toys...EVERY MORNING THEY GET OUT OF BED AND ASK TO PLAY TRAINS! It's a rare morning that doesn't start with the blast of the diesel horns.
They have Marx steamers that I got for a few dollars at shows and pulled the gears from so they can use them as "push" engines and push them around the layout. They also have inexpensive conventional diesels. The smallest of the small ones has an RMT Beep and I highly recommend them for kids. Super easy for them to put on the track, the top speed isn't fast enough to derail it on O36 curves, they seem pretty durable...
Both boys are capable of driving the trains via the conventional controller appropriately and throwing the switches.
They both GREATLY prefer pushing the Marx steamers (which won't go through switches just fyi).
It isn't the same for them to drive from the controller or have a layout that is above their heads, or where the scenery is static and they can't move the buildings, the cars, the cows...
They love accessories, and again, anything manual is their favorite. I picked up a manual culvert unloader with a hand crank. They will unload culverts all day. Sometimes they will use the button to work the culvert loader, but they prefer to put the culverts back in the cars by hand. They like loading the milk car more than they like pushing the button to spit the cans out of the car. A broken crane car that has been converted to a crane with a magnet on the hook is much more engaging to them than the electromagnet crane.
I expect much of this to change as they grow up. I'm enjoying playing with them where they are at. My "dream layout" is currently the one we all enjoy together - It is nothing like the one I planned.
My beautifully scenic around the walls layout may happen some day - hopefully with their help.