In my opinion,
The B&S in that area was originally built as a logging railroad by Frank Goodyear in 1891. Switchbacks were common in logging lines, and speed was not a concern. Frank had over a dozen Shay type engines, which were very slow, but great on hills.
Also, and this is important, the junction to get to Cross Forks was at the top of the switch backs. And Cross Forks would be a boom town in the 1890s growing to about 2000 people.
There were indeed plans for a tunnel, I have found references to money being spent on the engineering, but it was never built.
As this map from 1903 shows:
http://en.wikipedia.org/wiki/File:1903_ ... ilroad.jpg
The tunnel would have started from just south of the switch backs, and head north, towards the line to Wellsville, avoiding Galeton all together. This would have been to help in getting all the coal from the southern side of the line (from all the mines the B&S owned in Sagamore and Du Bois), up to Buffalo (where Frank would own three Blast Furnaces).
But alas, Frank over extended himself, the line to Buffalo was never profitable, and the tunnels long forgotten.
Check out this link for more details:
http://en.wikipedia.org/wiki/Buffalo_an ... a_Railroad
Some of the other guys on this forum may have a different opinion on this matter, infact one of them flew over those switchbacks few years back and has some great pics!