Mik - You are correct. FRA "insularity" has nothing to do with public road crossings except that (1) if electronic signals protect any public road crossing, those signals must be maintained and (2) failures or accidents at such crossings reported. Crossing protection installation is regulated at the state level.
FRA insularity refers to whether or not a railroad is part of the national railroad network. Case in point is the Western Railroad Museum at Rio Vista. Because it has, or had (I'm not sure), regular freight cars switched to independent customers on its line from the SN/WP/UP. Not part of the museum per se, commercial freight traffic. Under those circumstances a tourist or museum operation must comply with certain FRA regs. Not all of them. Same thing if the tourist or museum line operates over a regulated railroad. As it turns out, compliance makes a good deal of sense for safe operations and is not burdensome.
C&TS is another case in point. Its operations are not FRA regulated, generally, because it is not part of the national network and (insofar as steam locomotive inspections are concerned) it is narrow gauge.
Allen