Modeling a fire scene for model railroad can be done in many ways. LED can add a dramatic effect as can fake smoke and animated fire vehicles or crew. I once heard of someone constructing an entire area with fireproof materials and make a setup for a real fire; however that is potentially dangerous and NOT recommended. It could damage the entire network and pose serious security threat to house and family.
The safer option is to use Circuiton Firelites Flickering Flame Circuits (depending on which of three units you use) for fake fire effects. The FF-1 unit is for smaller fires and utilizes only 1 amber bulb. The FF-2 unit uses red and amber bulbs. The FF-3 can have up to 20 bulbs, which is perfect for a larger fire in a structure, or perhaps even a forest fire.
GRS Micro Liting manufacturers the Micro Flamemaker ideal for small fires requiring 6-12v AC or DC. The Super Flamemaker is for bigger fake flames and is 16-20v AC only. The grand daddy of them all is the Ultimate Flame Master, which is ideal for larger fake fires or even to simulate burning embers. It is 12-20v AC or DC and uses up to 6 – 3volt bulbs. Connecting an AM radio to one of the units is one way to simulate flickering effects.