(It has a layer of lead paint underneath that but the latex paint is generally in good condition, so only a tiny fraction of the lead on the exterior is exposed.)

You can exceed them by a tiny degree but not by much. 

I suppose it may work if you have a burning desire to do it.my partner in my airplane is doing something similar in Oregon he started a tiny homes manufacturing company ( making his own) and he owns a nice chunk of properly zoned dirt in Oregon 10 acres .. its worth about 3 million as it sits.. but he is going to sell the tiny homes then do 50 year leases on the under lying dirt so in essence create his own park as it were.But he has the Dinero to follow his whims and social desires of creating affordable housing for the mass's. 

Here's the issue/question: I feel like I'm leaving a lot of money just sitting in this land.Does anyone know about the possibility or legality of fencing off a 1/4 to 1/2 acre of the land and putting a mobile home/ tiny home for rental use? 

I've been looking into tiny home communities and investing in that market.

It is helping you weed out bad tenants.If they are not financially responsible enough to save that tiny amount of money they are just a breeze in the wind away from not being able to pay the rent.

I will say though prices seemed healthy and didn't make sense to me (seemed like lot of work for tiny return).

And moving from the tiny to the big: in addition to my own investing I've had the good fortune (?)

Depending on building and zoning it could be a tiny house .  

The nomadic lifestyle, tiny houses, minimalist lifestyle are also all factors that come into play