I took the Sheppard line yesterday and observed that it is all cut/cover with fairly high ceilings throughout. I can imagine it being quite straightforward to converting the Sheppard tunnels to LRT with the ability to switch back to full subway in 30 or 50 years when the density there may begin to justify it.
There's a good case for conversion. The Sheppard subway loses $10M a year in operating costs, money that comes out of our city budget. A conversion to LRT would help stop the bleeding. An LRT line from Scarborough to Downsview could actually turn a profit for the line. An LRT from Scarborough to Don Mills could be profitable but we'd still be losing $10M a year on Sheppard because it would continue to require expensive operating costs.
I'm not an engineer but could existing tunnel infrastructure such as signals not be used? Laying tracks for the LRT gauge, ramping up at a shallow angle towards stations to align the LRT with existing platforms and then adding overhead wiring for its pantograph should fill all the requirements for conversion.
Judging from how long it takes to build an LRT from scratch, I can't imagine a conversion taking more than a year for the full line. Buses would serve Sheppard for that period.
In alternative, the Sheppard East LRT could be built first. Once in service, a section of the Sheppard subway starting at Don Mills could be closed for conversion with express buses filling the gap between LRT and Subway. As a section is converted, the LRT begins using the tunnel to the completed station until the entire line is converted.