I've just done a little checking around... as of 1851, of all German nations only bavaria, Lübeck, Prussia and Austria have built railroads.

Prussia, like usual, has level-2 rail all over, the rest have level 1. Hannover, Frankfurt, Baden, Württemberg, the Hessian principalities... not a friggin' meter of rail track.

It's likely to stay that way into the 1860's because the goddamn stupid AI researches Navy and Army techs instead of comemrce and industry!!! Navy!!!! For a south German nation that doesnt even have a coastline!
Aaargh... well, they're also poor. Hm. (I loaded the game as the various German minors to see what was the problem.)
Here's a suggestion: Instead of "traditional academic", the minor German nations should start out with a "army-industrial" or "industrial-science" set. It makes more sense... many of the smaller German principalities did have railroads historically as early as the 1840's despite their limited financial powers.
Holstein had a railroad linking Kiel and the mouth of the Elbe by 1844. The Brunswick-Hanover railroad was completed in 1838. Frankfurt-Mainz 1840. Freiburg-Heidelberg 1843-45. Dresden-Leipzig-Halle 1838-40...