Blocks is mostly about form, function(s), space, layout size, and running line(s) lengths, and operations needs. Not required if you expect to operate only one train.
With two or more trains, you need to ascertain if there is to be more than one on the main line at once. Also if operating in same or opposing directions - with passing sidings.
Typically a yard area where trains are made up is considered one or more blocks. Perhaps an interchange point or an industrial switching area would be a separate bock.
On a long main, the ideal is a block per train with a block between the two as a minimum. Passing sidings would allow either cab or control functions to separately control the siding and the main for opposing direct block control.
You mention a common rail approach - also a means of setting up signaling.
Most of this is also the same concepts used in separating power districts for DCC - though the correlation is not direct. Setting up the exact points of block boundaries is a careful examination of the actual layout, and all the factors of size, and number of trains or motive power expected to have individual control at the variety of locations available.
There are a few simple rules that will locate gaps so you don't have shorts - see How to Wire Your Model Railroad or other how-to books and articles for details. The frosting on the cake is to think about how you'll operate the railroad, and where two engines will be near each other and need a gap between them. A little terminal at the end of a one-horse line will only need the necessary gaps. A big, busy terminal with multiple switchers and road engines active at one time will need a few more so (for example) the yard switcher can keep on classifying cars from the lead while a road engine moves from the house to the make-up track.
I have 12 blocks and two cab wiring on my 3X6 n scale layout. The control panel is an old old hard disk drive control panel. By the time I installed insulating rail joiners necessary for two rail wiring with electro frog track switches the blocks sort of made them selves. Add to that making all the passing sidings and spurs separate blocks so a locomotive could be parked on the sidings or spurs and the power switched off and the correct cab selected. The main line next to each passing siding is a separate block also so trains can be parked and the power switched off and the correct cab selected. The yard and interchange tracks are separate blocks also. So is it overkill? Maybe, but I think it makes the layout more versatile. On common rail versis two wires to every block and gaps in both rails I think two wires and gaps in both rails is better because its more DCC friendly in case you ever get to add DCC. Many years I was discussing with my local hobby shop guy whether to go with common rail or not he said the Great John Allen used both rails gapped and two wires so I defered to the wisdom of the great one and have been pleased with the result.
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