The people perpetuating the Sheppard-as-failure myth are the so-called transit advocates. It's the supposedly pro-transit Adam Giambrone and David Miller who've been most loudly claiming that Sheppard is useless, going so far as to call for it to be mothballed.
The DRL's problem in the 80s was that it had no political backing. The suburban councillors wanted their local projects (Sheppard, Eglinton) and the downtown councillors led by Jack Layton were fiercely fighting the DRL because of fears that it would bring more development downtown.
The province will build whatever the city demands gets built. They'll tinker around on the margins (an extra couple kilometres to serve "the 905," etc.) but basically what the city wants, the city gets. That's why the entire Metrolinx plan is basically just warmed over existing municipal projects. Does it really make sense to have four separate Viva-style BRT systems in York, Brampton, Durham, and Mississauga?
As for people who claim that studies will magically produce "optimal" solutions...just look at the studies on Sheppard. A study was produced showing it was an ideal location for a subway line. Then, after ten years and massive development, a new study comes out claiming that a subway is unwarranted. A study "proved" that VCC was an excellent subway destination. As Chuck said, the studies produce whatever result the TTC/its political leadership want. That's why they're the people who will decide if the DRT is built or not. I think the key is to get it linked to the waterfront plans. They're the biggest projects in the city, and a subway would really anchor them to the core. If their only transit is a streetcar that takes 25 minutes to get to Union, I fear there will be a lot of cars in those condo garages.
With electric traction, I'd like to see two separate levels of service on the GO corridors: an "S-Bahn" or RER-style service making every stop out to the inner 905, and then a regional express service stopping only at major stations. The S-Bahn service would be frequent and would serve as local transit within the 416. It should definitely have all the stops dunkalunk mentioned. I'd add one at Spadina/Bathurst, too. It's a fast-growing area with good transit connections. There are lots of other spots like Queen and Degrassi, Dundas and Sorauren, etc.