It will also make Germany a boring power to play. All you really have to decide is how many new units to send east, and how many west. Without being able to switch emphasis with rail movement you have no strategic manouver whatsoever.
The only alternative strategy available is to move your units by sea, essentially using the Baltic and Gulf of Bothnia to invade Russia via Petrograd. This practically invites Britain to invade Kiel, though you may have enough to defend here.
The whole character of war between 1860 and 1945 was that of railway movement allowing powers to reinforce their armies before decisive breakthroughs could be made, hence the heavy attrition.
If Germany takes 3 turns just to reinforce a static front against western Allies who can move units much further by sea; if the map design means that Poland, the likely main battle ground in the East, is the same distance from Berlin as from Moscow, then German is fatally crippled.
I maintain that the Central Powers need rail movement to stand a prayer in this game. Only a huge and artificial material advantage at the start and a swift victory over France and Russia, probably before turn 4, gives them any hope.
Yes, they lost the war in reality. But the main advantage that might have given them a victory was fast internal lines of communication. By robbing them of that you doom them.