This episode of Modern Marvels on the History Channel had the Chiodo brothers.
I posted this because these guys are experts at dioramas and scratch building..
They are based in California and still do handmade objects used in animation movies.
On one project they were using some of the same things mentioned on this forum to build a diorama. Sticks, bark, stones, roots, fake fur, etc. They used flour to simulate snow. However I'm sure the flour was just for shooting a temporary scene and not a permanent diorama.
They have found a niche market for projects where computer animation still doesn't cut it.