Don't quite understand the "residential neighbourhood sacrificing" thing. This isn't Beijing where we're going to bulldoze entire neighbourhoods in order to build an Olympic park. If anything, I can see a spot like the Portlands being re-revisioned in order to act as an Olympic park, with the associated residential development following the West Donlands model (athletes' village during the event, social and market housing afterwards).
Option B is telling Bombardier to take a hike from Downsview and building the Olympic Park there.
As for the public services cuts, I don't think there would be any. The Feds gave Vancouver huge amounts of money for infrastructure for the games.