I think whether it works or not would depend on the ridership on each branch and whether inter-lining would provide enough service on the branches.
The most affected by a reduction in frequency would be the Vaughan-St George segment of Line 1.
It's more of a challenge now there's three possible branches for a (say) northbound train at Museum. I see little chance it would ever happen.
Even if you ran a train every 90 seconds on Yonge-University, line, that's only one every 4.5 minutes heading up to Spadina.
Though I've long said that the only long-term solution for Spadina is a subway - with a spacing similar to Yonge. So if you build a spur/extension off Line 1 (southbound) at Spadina station (aka Lowther), and build a new platform under Spadina station at Bloor, then run the subway all the way down Spadina. Then you could end service on Line 1 between St. George and Spadina (Lowther), except for service vehicles, and resume the 3-line wye operations, same as in 1966.
The new line down Spadina past the new King/Spadina Ontario Line station, and could even eventually then turn east - say at Wellington or somewhere south or somewhere, and provide links to St. Andrew, King, and/or Union Station.
I doubt it would ever happen though. Anyhow, we are majorly off-topic.
Yes you're right the the regulation right now doesn't prohibits the city from making a Line 2 to Sherway.
I guess I should rephase it to the city/TTC isn't "legally" banned but "de facto" banned from planning unless the financial situation changes. Queens Park/ML would not fund anything they aren't in charge. Even in the Liberal era, they took the planning off TTC's hands for Line 5 and 6 and secretly made changes. Queens Park also controls how much financial sources the city could generate income so it's pretty much impossible for the city to build anything Queens Park isn't interested in. I.e. Eglinton East LRT and waterfront LRT. Good plans, don't know when they'll even get a shovel in the ground.
Though with funding still being lined up for the Line 4 east extension, the resurrected Scarborough-Malvern Transit City line (TTC's Line 7), the Waterfront East LRT/streetcar. The Line 5 extension from Renforth to Pearson ... then I'd expect there won't be opportunity to even fund any proper design before the next election.
There's no reason the city shouldn't work on some of these projects, many years in advance, to at least nail down the projects, so that they could proceed sometime after 2030 or so. Projects line the two remaining Transit City lines - Jane and some kind of Waterfront West connection from Exhibition to Queensway (and perhaps on Bremner). And yes, subway extensions to Sherway. (though probably the best way to do the latter, is to convince Mississauga that Mississauga wants it, and spends their political capital ...

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