I think railroads should stay the same. It's realistic, in terms of moving military equipment (nobody moves tanks across a continent on highways, period). The unlimited movement is also fairly realistic, considering the speed of redeployment compared to the speed of an advance in hostile territory (you can redeploy units all the way across a continent in the time it takes to make a 250 mile advance in hostile territory).
Capacity, yes, to be realistic there should be limits (and many of the old chip-based board wargames did have "railcap" rules). But, it might be a bit too much overhead in a game already heavy with management of units.
The big problem with limited rail movement is just that ... it would add vastly to unit management in latter phases of the game, when there are so many units. Every turn would be include 10 minutes of headache-inducing flashing screens as you are watching bazillions of units flashing around on their gotos (think what it's like with automated workers, now multiply that by 10 or so and remember that you'll want to be paying attention to the military gotos and trying to keep track of where everything's been sent to ...).
One little tiny thing they might do, to resolve a minor issue though, is to somehow reduce the need to put rails in every tile. The production bonus could just be given to cities connected to the capitol or to a port via rail. Add some sort of disincentive to putting rails in every tile too (make them take longer, perhaps, or put a limit of X number (say, 10) of rail tiles that you can build per city you have). Railroad sprawl bothers me too, aesthetically. But, it too is pretty realistic in terms of how rails are actually laid out in the real world. People are familiar with maps with show only trunk lines, but the reality of railroads once branch lines are included is that they do indeed sprawl everywhere. Possibly this could also be fixed simply by doing better graphics, where the railroads are still visible but smaller and neater.
The big thing they should keep in mind though, is to have an option in the editor to restore or remove unlimited movement, whichever approach is taken in the new game. As long as this is done, nobody can really complain too much as we are only arguing about defaults, which is silly.