From what I found, the Hurontario line will cost $2.1 billion in construction costs and $2.5 billion in operational and maintenance costs. I don't think we have the operational costs for the Ontario line yet so I don't think that's a fair comparison (unless the numbers for Hurontario have been updated of course). Not going to lie, that is still pretty pricey for an LRT since the Canada line cost around the same amount whilst also having a long tunneled segment (the line is also about the same length as the Hurontario line).
I don't believe that a linear transfer is justified just because that has been the status quo. The whole point of expanding transit is to improve the status quo. It is well-documented that transfers do come with a penalty even if walking and waiting times are zero. From a study done in 2018 (citation at bottom), one transfer equates to 15-17 minutes in equivalent in-vehicle time (EVIM). That basically means that people are willing to put up with a 15-17 minute increase in vehicle times to avoid transferring once. It goes up to around 20 EVIM when wanting to avoid 2 transfers. Arguably, Don Mills would be a transfer point regardless assuming the OL gets extended up there. However, the status quo will still be in place for those suburb to suburb trips which was something that Transit City was trying to encourage.
Obviously, some linear transfers are justified especially if a corridor changes density or character at certain points. However, Don Mills doesn't feel like a natural terminus like Yonge is, especially since the character of the street doesn't really change until east of Kennedy when the street becomes much more industrial.
Garcia-Martinez, Andres. “Transfer Penalties in Multimodal Public Transport Networks.” Transportation Research., vol. 114, Pergamon Press,, 2018, doi:10.1016/j.tra.2018.01.016.