I would agree (to the chagrin of 15" gaugers) that 18" is the narrowest practical narrow gauge. The 15" minumum gauge lines existed primarily for tourism and you cant stand up to full height in the cars, but with some careful planning it is possible in 18" gauge. The British built Gwen is shown in the photo, as is a train at Woolrich. The remaining Woolrich equipment, which was located at the Bicton Woodland Railway for a time, is now at the Waltham Abbey restoration project. These all have a WW1 trench locomotive heritage, and these type of locomotives were also used on a short lived shortline in England called the Sand Hutton. I have a number of links posted at the 18gauge group on yahoo.
I believe an 18" gauge railroad was located in Hawaii, however that may have been 500mm.