Whether the Don Mills-to-Kennedy section is surface or elevated, I oppose full interlining between SRT and Eglinton, as such interlining will surely create a capacity crunch in other sections of the network (Eglinton from Don Mills to Yonge, and Yonge from Eglinton to Bloor). Partial interlining is OK and even desirable, but not full interlining.
Every 2-nd train coming from Scarborough should turn back at Kennedy; every 2-nd train coming from Yonge should turn back at Don Mills or at Kennedy. Such arrangement will provide a one-seat ride from Scarborough to the Yonge-Eglinton area, but will not encourage too many riders heading downtown to use Eglinton LRT instead of the higher-capacity Danforth subway.
If full interlining is ruled out, then I am not sure that the cost of elevating the Don Mills-to-Kennedy section can be justified. It only saves about 4 min (for a 5-km section, and speed 36 kph vs 24 kph). If they can elevate for a modest extra cost and without extensive damage to other projects, then it's fine; but not at the price of cancelling both Finch and Sheppard.