Normally, your sidewalks should be about 6" higher that the adjacent road. If you want to use drywall mud, use some strips of .060" (for HO) thick styrene to define the edges of the walkway. Depending on what material you've used for the surface of your layout, you can pin or tape the strips in place, along the outside edges of the sidewalk area. Fill the area in between the strips with the plaster compound, then, using a drywall knife of suitable width, drag it along the length of the sidewalk, resting the blade atop the styrene strips. You'll get a smoother finish if you first dip the blade in water, then shake off the excess. Don't "work" the surface too much, as it's easier to go back after the first application has dried, if there are low spots to fill. I'd also wipe some vegetable oil on the plastic strips before installing them, to act as a mould release agent. Just put a little bit on a paper towel, then drag the strips through it. Leave the strips in place until the plaster sets. Once removed, they'll clean-up easily with dish detergent and warm water, and you can re-use them many times.
When it comes time to colour the sidewalk, use a very light touch if you're using a water-based wash applied with a brush. A soft brush at least as wide as the sidewalk works best - one pass and you're done, as the plaster will re-soften once it gets wet.
Wayne