It is good that your neighbourhood is walkable for the daily necessities. However, sprawl isn't defined by how far one lives away from a main street. It is defined by how often to you need to travel far (say more than 10km).
When you live close to existing amenities, that's dense living. When you live farther and farther away hence requiring the city to provide additional serves, that is the beginning of sprawl. For example, if there is a public library at Bloor/St George, it serves 8000 residents living by. On the other hand, if one choose to live at I don't know, somewhere called "Nowhere Ave" in Scarborough, a library of similar size serves only 800 people living by. The cost of operating that library is roughly the same. What do you think is good for the city?
Then if one lives at Eglington ave, the city only needs to big a subway of 4km there to bring people to work and other things. Yet if you live at Steeles Ave, it is more than 14km and the cost of digging that tunnel is two or three times more, just because you choose to live near Steeles as houses are bigger and streets are quieter. It is not like there is no decent space to live south of Eglinton. Toronto is big and there is plenty of sparse space closer to downtown. What makes it worse in Toronto is that, the flat fee system means people who live close to downtown who usually travel shorter distance pay the same as those who live far, therefore subsidizing the suburbanites again. If the subway didn't need to run that far and cost 50% less, the fare didn't have to be this much in the first place!
So don't pretend "my neighbourhood doesn't require me to drive a car to buy kitchen towels". The fact is, by living far away in sparse area, everything costs more due to lack of economies of scale, and when the costs evens out, you are subsidized by others. Yes you can hop in the car and be on DVP in under 5 minutes, have you thought about the fact that people who don't drive a car actually also paid for the DVP and its maintenance just because you choose a car dependent life?
You realize that about half of the GTA's densest census tracts are in the suburbs, in Mississauga, North York, Etobicoke, East York and Scarborough. Even among the single family home neighbourhoods, the new ones are about on par with North Toronto, The Beaches and Washington, DC.
As for subsidization... there are plenty of people who paid for transit through their taxes even though they drive. Both the highways and transit are subsidized by people who don't use them. And to EnviroTO, I don't think anyone is suggesting that Toronto should pay for transit outside it's city limits, that should be mainly the responsibility of the suburbs and the provincial and federal governments - although the city of Toronto could stand to benefit if the suburban transit brings in workers that support more office buildings and shoppers that support retail, theatres, Ontario place, etc. Also, much of the people getting on the subway at Finch do pay property taxes to the city of Toronto. The city limits are at Steeles.
And as for space, it might seem like there is a lot in the Old City of Toronto, but in the grand scheme of things, it's not that much. The waterfront lands might seem huge, but they West Don Lands, Lower Don Lands and East Bayfront are only expected to house 24,500 residential units. The rest of the Port Lands might add another 15-20,000 units. Downtown Toronto? Maybe 40,000. Laneway housing? Apparently only 6000 units. The Avenues? Maybe around 100,000 units. Various other nodes, like Yonge-Eglinton or Liberty Village? Maybe 20,000 units. Add all of that up and you get 210,000 units. That's pretty impressive, but the population of the 416 and 905 suburbs is about 5,000,000. Compound that with the millions more the region will grow by in the coming decades, and the shrinking average household size. So there's enough room in the Old City of Toronto to house about 5-10% of the suburban population and future new units. That means either you destroy neighbourhoods like Rosedale, Trinity Bellwoods or Riverdale and replace them with glass towers, or you accept that the suburbs will have to handle much of the future growth and plan your transportation network accordingly.
You also need to consider that not everyone who lives in the suburbs wants to live there. Some live there because it's all they can afford. What's the cheapest 2 bedroom unit you can get in the old city? In Jane-Finch, you can buy a 2bed/1bath apartment for $40,000 according to MLS. The unit is probably in pretty bad shape, but if you just immigrated to Canada with empty pockets, it will have to do. These apartment complexes in the suburbs should be provided with good transit. It is these areas that have comparable densities to the densest parts of Toronto, the people there often cannot afford a car and would most likely make use of the transit, and there is a lot of potential for intensification. Unlike downtown Toronto, where the highrises are often surrounded by lowrise buildings of historical value, the highrises in the suburbs are often surrounded by grass, parking lots, strip malls and post-war townhouses, which means these areas can be intensified to levels that would make providing transit - and other services very efficient. Also, many of these highrises areas are lined up along major roads: Finch, Lawrence, Eglinton, Jane, Bathurst, Bayview, Warden, Kingston Road, McCowan, Sheppard, Don Mills and Kennedy, which makes it pretty straightforward to build transit routes since you have a good ROW to work with and the routes won't have to make twists and turns to hit the areas of high density. Plus, these high density areas are about as far apart as rapid transit stations.