I just finished up an animated prairie dog town for my O scale railroad. I used HO scale Rustic Rails beavers. They have the same body shape as a prairie dog, and the size looks good in o scale, I just had to modify the tails. 

Figuring out the the animation action was the difficult part. Initailly I "toyed" with the idea of making cams and followers to create the up and down motion. However I decided that it would be too complex.  I decided to use magnets to actuate the up and down motion. The repelling magnetic field causes the piston to rise, and make the dog appear to pop up in the hole. The unexpected neat thing is they also slightly rotate around and emerge in a different direction. 

The animation,  under the scene  is a disc that rotates with magnets radomly placed and glued with the repelling field up. The pistons have the magnets on the bottom with the repelling field down. As the disc rotates under the magnet the dog pops up. Each piston has a stop collar top and bottom. A small 1.5 volt gear-head motor drives the disc through a Delrin plastic link chain and cogs to reduce the speed. In the future I am possibly going to write an article for one of my favorite hobby magazines.