I am gonna try what you said before cutting the top. And if a problem. try some not by the book track laying. I have been known to jury rig some stuff and make it work LOL.While trains will clear a really close guard rail while on straight track, anything coming from, or going into, curved trackage may bang into into a guardrail due to the car overhang. You might want to set up some track on a table and do some observation with measurements to see if it would work or not. Short cars and short locos may or may not be a problem, but longer cars and longer locos most likely will be.
I could be wrong (wouldn't be the first time ) , maybe an extra inch would be enough clearance. But better safe than sorry.
Most use plexiglass. Or acrylic. On my postwar o scale layout, I have he fascia board about inch and a half higher. The ho layout is plexiglass.I am gonna try what you said before cutting the top. And if a problem. try some not by the book track laying. I have been known to jury rig some stuff and make it work LOL.
Also, don't know what to make a guard rail out of? Possibly hardboard?