There is a rail line that runs from Tigard,
across I-5, through Lake Oswego (tracks run
right next to downtown), over the Willamette over an
existing bridge, and north to
Milwaukie.
As for the Willamette Shore Trolley - you can
probably run DMU trains along with the streetcar; you just can't run the streetcar along with a freight train. Correct me if I'm wrong... the only problem would be FHA regulations; diesel trains can definitely run on electrified track - the catenary systems are high enough up in the air for them to fit under.
From Inekon's
website:
Pantograph operating range above the top of rail: 3 600-6 100 mm
so about 10' - 18' height of overhead wire. The company that Trimet bought its DMUs from - Colorad Railcar - makes 2 models; a single-level and double level. The single-level (which I believe is the one Trimet bought) is 14' tall; the bi-level is 19' tall.
The Bombardier Talent DMU (which everyone thinks is much sexier), as well as pretty much any signle-level train, can fit under catenary as well. Actually, the Talent train system can come as a diesel or electric version...
Anyways, you could probably run a diesel train to Lake Oswego, transfer to the trolley line, and run it on the same track up to SoWa. The trains should be able to fit - and you could build a little transfer station just south of SoWa where they could get off the streetcar line and change direction. Not that this would be an ideal system, as you are still short about a mile+ from downtown. It could help to build frequency along a shared route from Tigard -> LO -> Milwaukie, however.
The only problem is once they build platforms for the streetcar on the LO line, I'm not sure if the diesel trains will be able to fit through them!
info on the train selection