I've decided upon a name and location for the new layout: Nether Stowey. (As it turns out, unsurprisingly, I'm not the first person to invent a railway line to this particular small town - a quick Google search turns up this GWR N gauge layout, see also here.)
Quantock Online has an informative page about the town (where, incidentally, the poet Coleridge lived for several years) along with a number of pictures. The link to old photos is particularly interesting.
So why Nether Stowey? After all, I've never been there, and it never had a railway.
Basically, I was looking at the OS map of Somerset, looking to see where I could 'invent' a railway that wasn't completely implausible! I decided I should stick to the S&D branch scenario after all but move my search away from the Somerset levels (given the difficulty of modelling them convincingly in a small space coupled with the absence of anywhere big enough or far enough away from the existing railways to merit a new railway line!). This opened up a number of areas I'd not previously considered, and the area West of Bridgwater seemed ideal. No railway was ever built here as far as I know, but a number of reasonable sized settlements exist to warrant the rewriting of history and conjuring up a 6 mile branch from Bridgwater to Nether Stowey, via Chilton Trinity, Cannington, and Fiddington (Chilton Trinity and Fiddington stations probably being sited some distance from their respective villages).
The idea is that after the opening of the Bridgwater railway in 1890, a new company was formed to build a railway from Bridgwater to connect up with the West Somerset railway some 20 miles away across the Quantocks. In the end, the railway ran out of money so the line was terminated at Nether Stowey, adding some justification for the small size and minimal facilities for a branch terminus.
From the photos, it seems that Nether Stowey is a fairly idyllic rural town, even today, and the surrounding countryside of rolling hills is perfect for the type of scene I want to create.