@Intrepid,
Hey, 'trep', enjoy my appearance in politics while it lasts.

The only reason I'm here is because it's a Canadian topic, an extreme rarity. I'll respond to your points in the same order you've brought them up.
I haven't put a lot of thought into the independent body thing, but I'm sure we can come up with something. Perhaps something along the lines of an ombudsman. Names to be put forth and voted on by the people. Definitely
not appointed, like the senate!
I'm
not a fan of Dion. I think Rae or Ignatieff would be the better leader for this coalition (and for the Liberal party), although I'd prefer Layton (I'm an NDPer) be given a chance.
The problem with Dion is that he
appears to be weak and indecisive. He does not come across strongly when he makes speeches on TV. If I were him, I would have gotten some public speaking lessons, so he sounds better in English. Appearance can be everything in politics.
I don't hate the monarchy, but I think they've become irrelevant for Canada, seeing that we have had our own constitution for some time now. I would prefer to sever all ties in that regard, and go with the independent body idea (let's trade some ideas on that point). The monarchy had it's day, but it's time to say goodbye. I would like a replacement that's truly "made in Canada".
As for the g-g trying to save Canadians money, that would be a bit naive, I think. I think Harper twisted her arm until she said 'uncle', and said, "Okay, okay, anything to get rid of you!"

In all fairness though, I tend to be rather cynical with all things political, and I do think she was talked into the decision.
Here's my take on the sequence of events that will lead up to and happen after Jan 26th:
Harper will make good to let the opposition parties have some say in the upcoming budget (because he was surprised by the coalition idea by the other parties and it may have come off), enough so they will say "never mind then". This coalition idea will all blow over, like it never happened. There won't be an election. There won't be a vote of non-confidence. The budget will pass. Life will carry on. At least until the next bit of nonsense.
The end.