I like the idea of yellow stripes. Although I think you could just put in 2 yellow bands and they would get the idea. I agree a rotary tool for the potholes is a nice touch. And filling in 1 or 2 of them could be funnier still. I would make all the crazy stuff on the top half by clip so it is not in the way of comfort when holding, after all it is going to be some sort of a gift.
As far as the material. I might try casting some of that gravel stuff they sell in hobby stores next to all the model trains. Not sure what it is made of, could be stone or some sort of plastic. I personally am not setup to cast yet and if I wanted to do something quickly without buying casting materials I might try:
A brass tube, painted black, coat with medium CA, roll in gravel stuff for train models. Build 2nd layer on top if want thicker. Then dip or coat in an epoxy or thick CA to get a top coat I can sand and polish with plastic polish or MM. It might have a bumpier (road type) texture with a thin top coating, no sanding needed just a light buffing.
Just a quick and dirty idea, afterall it is supposed to look like the roads right?[
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