I think that people seriously underestimate demand on Sheppard. It has three employment areas along it (North York Centre, Consumers Road, Scarborough Centre) which collectively have a fair amount of employment which is roughly comparable to the amount of employment along the Bloor-Danforth line plus the proposed extension to Scarborough Centre. One of these areas (North York Centre) has a low vacancy rate which is similar to downtown, so even though it has done poorly because high commercial taxes were high in the late 1990s and early 2000s, I suspect there ought to be demand for new buildings there aside from the Hullmark Centre. Admittedly Consumers and STC have high vacancy rates so I think demand will mostly be westbound in the morning and eastbound in the afternoon. Sheppard also has an enormous concentration of new condos along it, far more than Bloor-Danforth, and runs parallel to the 401. Sheppard certainly is infinitely more useful than the Vaughan subway extension, which runs through low income areas which have low development potential. Vaughan Centre will fail because few people want to live near a CN railway yard, and although one condo is being built there I doubt it if very many more will be built. York University, like other universities, has demand spread out throughout the day instead of heavily concentrated in rush hour, reducing ridership potential. I think that there is opposition to it mostly because people think that everyone wants to go downtown (which is false), because councillors want to do the opposite of Rob Ford to make him look bad, and because Miller deliberately fudged ridership projections to make Sheppard look bad (like he did with Eglinton, and the opposite was done with the Vaughan extension), and because the downtown relief line hasn't been built yet.
I think that what you say is partially true. There are certain advantages which you have enumerated to the Sheppard routing, like employment areas, development potential, and proximity to the 401, but the problem is that a Sheppard Subway is just the wrong mode to capitalize on most of these things.
The employment areas along Sheppard aren't to be underestimated, and I think too that more consideration needs to paid to the idea that not everyone works downtown and commutes there in the morning and then back to the suburbs in the evening. To me, the problem with a subway along Sheppard Avenue is that it doesn't take into account the way that a lot of people would reach those buildings. North York Centre may look like a second downtown, but the Consumers Road employment area is very much a suburban office park style development. A lot of those towers are set far back from Consumers by their parking lots, many are located further down Consumers and a walk away from Sheppard itself, and when the choice is between the subway and an underground parking garage only a few minutes' drive from 401 access, a more than sizeable chunk of people will simply drive instead (especially the many 905'ers who work in those buildings, for many of whom TTC subway extensions will do nothing). As for Scarborough Centre, new rapid transit (currently slated as the BD extension but we'll see what happens in that notoriously flip-floppy debate over the election period) will be reaching the area soon, and for better or for worse the SRT does already reach the area. For a Sheppard Subway to reach Scarborough Centre plans for a transit hub at the meeting of the BD extension and Sheppard East LRT at Sheppard/McCowan would have to be abandoned, as would the ability of Sheppard to serve as a northern crosstown route for Scarborough as the subway would have to dip southwards towards STC.
But with regards to what we've already seen from the existing Sheppard stubway, the other factors that you mentioned still can't make the case for a subway on the remainder of the route.
Around the current stations on the Sheppard line a forest of condos has arisen, and yet the line still sees abysmally poor ridership. Why? I think that this effect speaks to a fundamental problem with envisioning the Sheppard line as a 401 alternative. Yes, the line is short now, and that could account for some of the low ridership, but simply put using it can be extremely inconvenient. When living in a condo along the route, taking the time to head deep underground to the overbuilt stations of Line 4 to access a subway which will take you only a short distance before you need to transfer again isn't really as attractive as simply driving where you need to go. Especially so when you factor in the fact that the subway is simply too slow. While cars speed by above ground at 100+ km/h (unless traffic is too heavy) on the 401, you're sliding through the tunnels on a train which has a maximum speed of 88 km/h (the T1s) and doesn't reach that speed, slowing frequently to stop at Bessarion and Leslie and so on...
Really, no Sheppard Subway cannot convince people to get off of the 401 that it parallels. I just don't see that street working in that way, and what we've seen from the existing stubway would only corroborate this account. Sheppard will in all honesty probably work better as an LRT, and when that option is more cost-effective and can be extended further anyhow, it's the better choice.
I realize also that this post is a bit rambling
apologies...
Edit: I completely agree with you that the Spadina extension to Vaughan is useless though. That particular line should've stopped at York University, or maybe Steeles West.