I'd agree with the comments re: tunnels & logging lines. But given the limitations imposed, a little fudging in order to reach a compromise is needed. I guess it really depends on how 'prototypic' bigsteel wants to be.
This poses an interesting problem, in that many may feel that to make logging look prototypic, you usually need to have a lot of 'dead space' on your layout. You know, lots of scenery, trains out in the open, etc., and not a lot of tunnels- which sucks for the model railroader. Yea, it may be prototypic to a degree, but this is also a hobby where we have to operate under a lot of constraints that lead to compromises we may/may not like. Having the ability to dive a train into a mountain is helpful, esp. if you are trying to divide scenes, use holding/layover tracks, staging, unprototypic curves or whatever.
So, if you're o.k. having tunnels, esp. on this layout where you can have difficulty trying to divide scenes 'reasonably', then that may be a compromise that you live with.
You could also use scenery to 'hide' tunnel entrances; I plan on using lots of trees, mountins, etc. to hide entrances on my layout modules. A great example of this might be on that switchback, where trees hide the line of sight.
You could use a bunch of switchbacks to gain elevation quickly though, as was mentioned, but you'd have to change the plan too much, and that may not be acceptable.
Also, you could say that you mining operation is what pays for the tunnels. To get me to buy that, you'd have to put the mining operation on the other side, where the landing is though. Or, you could put an old mine over there, stating that it had been relocated/the deposits are used up or even have a small stamp mill near the logging town. Just some thoughts.
I also agree with the 'scene-cerity' comment. I also have a problem with looking at a scene over a scene- just doesn't do it for me, unless there's enough vertical/scenic separation. From the original lilliput logger, there isn't a lot of separation vertically, which is what always bothered me about the mining operation (it sits just over the engine house in the original plan... I just didn't like it...)
My way around this is to actually divide it up into modules (which is what I plan on doing), so each scene is separate, arranged in a linear format. The layout could be rearranged into a sort of 'walk in' U shape, with a lift out behind the operator, but the plan would take some major reworking. However, you could use the same square footage (plus the cockpit), where you'd sit. However, the advantage of the other plan is that it uses a lot of scenic blocks, etc., and will make the smaller area seem a lot larger than it is.
Just a rambling free association re: this plan.