I would love to do something similar, but using our house as a model. So here goes nothing...
I started with a picture of our house. It looks like this:
I imported it into a drawing application, and added some hand-drawn lines. I then started with the bottom right basement. I designed each room in sketchup individually. Each room has 3 layers of 1/8 in mdf.
Here is the basement, I started with.
I then did the right hand side of the house.
I continue like this, adding lines to my drawing, and then modeling it in Sketchup.
Here is the landscaping around the house.
Once, I modeled everything, I converted each layer to a flat image, and ended up with a whole bunch of cut files that looked like:
Once I cut it all, it looked like the following:
So I now have the base of the artwork. I now want to cut little people and put them all over. Stay tuned.