I buy several sheets of 1/8"-thick basswood (a domestic wood cut in Northern Michigan and Wisconsin) sold by Midwest Products. I have used both the 2"- and the 4"-wide sheets. I have found Midwest Products materials at both Hobby Lobby and Ace Hardware stores locally. You can also get it on the Internet; you just have to account for the extra shipping cost. I prefer basswood over balsa wood, because it seems a bit harder and heavier. If you spike your rail, the choice of using basswood over balsa is a no-brainer.
(external link: Midwest Products)
I use my tablesaw to rip those sheets into strips. Real-world wooden main-line ties are 9" wide and 7" tall. Since I buy 1/8"-thick sheets, I wind up with 8" tall ties in S-scale. The height is really irrelevant, because the ties are buried in ballast, so no one will know (unless they read this page!). There is a danger with cutting thin strips like this on a regular tablesaw. You cannot just set your tablesaw's fence to a scale 9" (which in S-scale is 9/64") and start cutting. First, you cannot get the entire strip past the blade, and, second, the chance for kick-back is very high (especially when you reach the end of the cut of the sheet). So, you have to cut the strips on the outside of the blade, as is shown in the photo (the "waste" material sits between the blade and the fence). The problem now is that you have to account for the kerf of the blade. So you must calculate and then adjust the fence for each cut. As luck would have it, the blade that I use yields a 7/64" kerf, so 9/64 + 7/64 = 16/64, or 1/4". Of course, this is for S-scale and for my particular blade (Woodworker II thin kerf). You will have to adjust this for your situation. What this means, for me, is that I can move my fence over 1/4" for each strip I need to cut. Very easy. Do I get perfectly even-width ties? No. But, I can live with that. For really bad ones, I simply don't use them; for other slight variations, well, that is just part of the imperfect world that we are modeling, isn't it?
This photo shows how I do my set-up at the tablesaw to cut every bit of material from the sheet. As the feather-weight sheet is pushed through the blade, it has a tendency to want to ride up on top of the blade. So, I put a sheet in position, and then clamped two scraps of wood to the fence, just barely clearing the sheet. That way the sheet could be cut without it rising up. Also note that I am using a zero-clearance insert in the tablesaw. Otherwise the strip will get caught in the gap. I forgot to use it in the photo above.
To be able to cut the entire length of the sheet, I use the next sheet as the "push stick" for the previous one. I just let the previous sheet fall off the back of the tablesaw. This set-up worked well. I was able to cut up the entire sheet with almost no waste.
Once the ties are cut to length, it is hard to tell sometimes which side of the tie is 9 scale inches wide and which one is 8 scale inches. What I do before I cut the ties off of the strip of wood, is I draw a pencil line on one of the 9-inch sides (i.e. the top or bottom of the board). That becomes the bottom of the tie, and it easy to see which side is to have glue applied to it.
To actually cut the tie to the right length, I use the NWSL Chopper II. It can handle 1/8"-thick wood. It makes a very nice cut, although the blade may flex a bit. On the Chopper, I set the stop at 8-1/2' scale feet (for regular ties; variable lengths for turnouts) and chop away.
I use ceiling tile as my sub-roadbed for track. I simply apply a bit of yellow carpenter's glue to the bottom of the tie, and then press it into the ceiling tile. In the "Planning" step, I drew a line on the ceiling tile as to where the end of the tie should be. I install the ties accordingly. Note that in this particular photo, I went through several iterations before I decided on my final track plan, hence the many lines, and the fact that the pen line was drawn in the "green grass" area here. In the real world, ties are typically laid on 22-inch centers. Given that a tie is 9 inches wide, that would leave 13 inches of space between each tie. I cut a piece of scale 12-inch wide strip of styrene (close enough), and then used that as my spacer block in between ties as I laid them. I wrote the word "TRACK" on the spacer, because I have a similar one for laying turnouts, but the ties under turnouts are closer together (10" spacing there). The other tool I use when laying ties is a plastic square, so that I can eye-ball the tie being laid perpendicular to the pencil line (it can be exact on straight track, but it has to be guessed-at a bit on a curve). Some variation is, of course, prototypically-correct. The older the line is that you are modeling, the more crooked the ties get over time.
After all the glue has dried, I use the thin edge of a ruler to determine which ties need to be sanded down. A light sanding is typically necessary to ensure that all the ties are flat and even. I built this contraption using two pieces of left-over MDF boards. Some sandpaper was glued to the bottom of the tool. By leaving a bit of sandpaper sticking out the front and back of the tool it reduces the chances of it catching any ties that stick up too far. Go light at first, or else you can rip some of the ties off. After the initial sanding, if so desired, you could go through all the ties and use a dental pick, an Exacto blade, or an awl and pick at the ties, especially the ends. This will simulate wear. If the line you are modeling is old or not well-maintained, this is especially effective. Maybe even have some ties be so worn out as to appear rotten. When done, you probably want to do another light sanding, to get rid of any fuzz that sticks up.
After using the vacuum cleaner to clear off the area, I stain the ties with Minwax "Special Walnut" stain. I prefer to stain them after I have glued the ties, because it makes the job go faster and the stain doesn't get all over my hands. However, because I stain after the gluing, I have to be careful about excess glue. Once the glue hits the wood it seals it from stain, so any exposed wood covered with glue will never be stained.
(external link: Minwax)
To complete the topic of ties, once the ballast is dry, it is time to make those perfect railroad ties look like they've been there a while. The first thing I do is to use the famous India ink and rubbing alcohol mixture to put some dark shadows in the ballast. I simply use a soft brush and cover the entire area. I let it dry for an hour or so. Next, I use a fairly stiff brush and dry-brush acrylic white paint over the ties. I also dry-brush this same white over the tops of the ballast. This is especially effective on the darker bits of ballast, because it makes them look like rock. If you get too much white paint on the ties, simply use your finger right away and wipe it off. That gives a nice effect also. Don't wait too long because this paint dries very fast.