That proposal died several years ago when former NJ governor, Jim Florio, spearheading an investment group, bought the ground for condos. But there is a small museum there already. The name escapes me at this time but it has Phillipsburg in it. They actually have an old amuseent park train ride that they run occasionally.
The main reason it didn't move forward is the severe opposition by other rail/transportation sites in the state that wanted to be the "official" state transportation museum. Now I heard a really great idea that I will pass along here. Make all transportation sites in the state, part of a statewide transportation museum. Buy a ticket at any one and it allows you access to all of the others. The money is deposited in a kitty for all museums to draw from. The avantage here is that instead of seeing what a single site has to offer, i.e, a train ride, restored rolling stock, etc, you can see it all. And the sheer size was a problem as well. It seems that Phillipsburg was the only single site that had enough room for all of the proposed rolling stock. Another reason why a statewide system would work better.
You can learn just as much from what is not said as you can from how much is said.