I think we need to look at the historical significance of railroads instead of looking at what they actually do. The introduction of railroads meant that huge amounts of men and equipment could be moved long distances very quickly, allowing armies to completely redeploy across distances they would normally have to cross under their own power. The downside, of course, is that you have to lay rails anywhere you need the trains to go.
Another thing to think about is that to load and unload lots of heavy equipment you'd need a rail depot. Rail depot could be a city improvement that needs to be built before military units can be loaded or unloaded, and units could only be loaded and unloaded at cities with rail depots. That would mean that you could load a tank unit at one city and send it off to another city connected by rail line sort of like you'd transfer a unit between two cities with airports, but they'd have to hoof it to the front from there.
That system would also leave room for a limit on how many units could be transported. Every turn a city could send off, say, two or three units to any city on the rail network, ending the unit's turn. In case of an invasion, then, the enemy would have to move only a portion of his army to the nearest city, wait till the next turn, and then start moving them out under their own power to respond to the invasion. If you could bomb nearby rail depots inside the cities, then, the army would have to move even further under its own power, allowing you to get a foothold in enemy territory before the enemy could respond with the full force of its army.
Well, that's my idea. I love any idea that allows for more strategic options, and a massive air campaign to take out rail depots before an invasion in order to cut down on the enemy's mobility, or even a strike to destroy the rail depot of a city where a big portion of the enemy's military is stationed to strand them there would be a really cool option.