Sorry I havent been able post sooner than this..
-You dont need to copy the tram from HL if you dont want to, you can make your own if you wish, maybe a different design (more personal, for fewer passengers etc);
-The train doesnt have to move at all, and It isnt actually required! You could just make the
train tracks and a tram stop as is specified in the rules. Of course, if you can manage to pull a nice sequence with the tram getting to the house, it would be nice :);
-The setting would be more like the first pic, since it's an outdoor one. The reason to mention the cliffs, is so people dont make a house placed in the boring flatness of the desert! Be creative, you can do lots of things in the outside that will make the map more interesting.;
-The house is near a cliff. It can be on the cliff (as Muzzleflash pointed out), under a cliff, on top of a hill etc. The choice is yours and each has advantages and disadvantages.;
-The reason why we are mapping his house and not his office is very simple. The office would be a bit too easy and we would get much less variaty in the entries. With this theme I'm sure we are going to see great stuff!
I could give more tips, but since some of you have already started, it could be unfair. I'll keep answering questions as soon as possible