Rainforest, how well do you know the area? Where would you put the additional stations? There just aren't a lot of suitable spots.
I don't know that area too well, and my suggestion was based mainly on some previous posts I read here. Thus, there was a proposal to run the extension along Danforth - McCowan. In that case, stations could be added at Eglinton / Danforth, then Lawrence / McCowan (near the hospital), and Ellesmere.
But if that is not correct and no useful stations other than Lawrence / Brimley can be added, it is a disincentive for the subway extension. Just elimination of the transfer at Kennedy is not a good enough reason to spend 1.2 B (subway extension) instead of 490 M (building LRT on the existing, fully separate guideway).
The expected ridership volume should be examined more carefully though. The Metrolinx's Modeling Backgrounder gives a peak point projection of 6,400 pphpd in 2031, but obviously the model can't be very accurate for such a long perspective.
If I had the authority, I'd ask their modeling team to recalculate the SRT's projected peak point ridership under varying input assumptions. If it never exceeds 10,000, I would opt for the LRT as it will easily handle the volume, and save the difference for other GTA projects.
If the demand might exceed 10,000 - 12,000, then subway extension might be a better choice. Technically the fully separate section of LRT can be designed to handle 15,000 or more pphpd, but at some point that will defeat the interoperability with the on-street ROW sections (where longer trains can't run), and we will end up with too many transfers once again.