Perhaps I can answer this better than anyone since I worked as a check-in agent. Yes, you can pay in cash (or at least you should be able to. Maybe some airlines won't but I'm sure the 3 major Canadian airlines will). It won't be CSIS or the FBI who will be suspicious of you. The idea that either of them would know you paid in cash is absurd. The airline will be a bit suspicious and they could view it as 1. potential terrorist (unlikely obviously but still when you're an airline you take this seriously. Much harder to trace cash than it is a credit card) or 2. counterfeiting, especially if you're paying with large bills like 50s and 100s or 3. something drug related or 4. nothing.
To give an idea of why such an event would raise some eyebrows, in the 2 years i was in the position I only had one person ever come up to me and pay for a ticket with cash without a reservation. Usually for last minute tickets you're talking upwards of $1000, so for someone to have that much cash on them is a bit strange. I guess we view airline travel as something that involves planning and the idea that someone would just show up at an airport expecting to be on the next flight out and be fine with paying 3 or 4 times for a flight just doesn't make a lot of sense.