The horse tramway was supposedly relaid between Broadway/War Memorial and Derby Castle to allow a future extension of the MER to the Sea Terminal/Victoria Clock.
Like with so much of the Douglas promenade 'enhancements', it's surprisingly difficult to work out what was actually constructed compared to what was promised. As the budget overrun got bigger and bigger the scope of the promenade work reduced. This is why we have a five-foot-wide weed-ridden verge down the side of the sunken gardens where the single-track horse tramway line should be; the money that was earmarked for that has been swallowed up by the budget black hole.
I'm sceptical- to put it mildly- that the MER could ever support a commuter railway service. Perhaps it could from Laxey, just about, but certainly not from Ramsey. From Ramsey the X3 Manx Express bus which goes non-stop over the Mountain Road* will always a) be quicker and b) be more convenient for those who live in the estates of Ramsey.
(*subject to weather and idiots driving too fast and parking their cars in a hedge)
I think a commuter service could be more successful on the IMR, especially if/when they ever get the diesel locomotive 'lovingly' referred to as "The Cabbage" to work properly. Or if they get a modern railbus. The A5 is pretty much a car park from Ballasalla all the way into Douglas in the morning, the IMR station is right in the city centre next to all the law and finance firms on Athol Street, and the 'south bus' remains the most (only) profitable route on the island.