If the railway station and its tracks is under Singapore territory, actually Singapore can "force" to change its "usefulness" of the station to something else (like the government evicted kampung settlers to be located in HDB). They can issue a legislation for that and it becomes legal. Of course they will pay compensation to Malaysia government. If this is the case, I think LKY has done it long before.
That's why the above mentioned is not the issue. I think Malaysian still consider the railway station and its tracks it their territory and that's why if Singapore forced his way to change the status quo, they will consider it as an act of war and it will also jeopardise the supply of water from Johor.
It is not that simple and requires the co-operation and agreement of both governments. You are not dealing with an individual who is subjected to the laws of Singapore. That will be much easier as the law may have provided for such events such as compensation for compulsory acquisition or as you suggested, new legislation can be made to correct the situation.
This is a long and contentious issue between the two governments which do not share the same views for the present. The Singapore government has made certain proposals to develop the land in and around the railway line and it is now up to the Malaysian government to followup. This will take a long time and will depend on how the relationship between the leaders of both governments will pan out. Comments in the press that the recent trip to Malaysia by MM Lee was perhaps a last chance for the leaders of both countries, particularly the younger leaders, to make amends and to renew contacts for a better future of the two countries.
I think one opportunity that may be forthcoming is Malaysia's aspiration to develop the huge Iskandar project in south Johor and is seeking
Singapore's participation. Singapore may in turn, request a solution to the TP station problem, among others. So both governments will have to sit down and work out a deal that is beneficial and acceptable by their leaders and peoples.
As a small country, it is to the best interest of Singapore to respect and abide by international law. Therefore Singapore cannot forcibly evict foreign government assets and not be subjected to the same treatment by others.
Your last paragraph may be a little far-fetched. You can own a place in a foreign country as many Singaporeans have, but that does not mean that place is your "sovereign territory" in the sense that you will attack (an act of war) those that trespass your place. You are still subjected to the laws of that country and if that foreign government wants to acquire your property there is not much you can do if the law allows it.
However, the TP railway station is different as it is not an ordinary issue. It is a very delicate one between two sovereign governments created by the then British colonial government. In fact Singapore has every right as any other nations to protect its own territory by making sure foreign elements do not trespass. In other words, Singapore can stop trains, aircrafts and vessels from entering its territory without approval. But that is not the intention of the Singapore government and that's why it chose to do it in a more acceptable way.
If it is your sovereign territory, you must defend it from intruders, say by installing barriers, fences or other devices to prevent others from entering and you may employ guards to ensure security is maintained throughout. Could you imagine Malaysian troops on Singapore soil guarding the TP station? Now, who is then trespassing and starting a war if such a scenario were to take place?
As to the issue on water, Singapore has taken steps to ensure its own adequacy when the water agreements with Malaysia expire. Let's hope nothing untoward happens in the interim that will derail the process.
The Singapore government has already taken the right steps to being self-sufficient. Not only that, Singapore is now selling water technology to the world and adding this venture as another foreign economic wing.