Intersting photo! Yes, the portal location around Queen could be tricky, but I think it's doable. It would probably have to happen at the same time as the construction of the station box for the DRL station, so the area would be a mess anyway. Given the depth that the DRL station would need to be to cross under the Don, the LRT platform could be overtop of it, possibly 1 level below mezzanine level. It shouldn't be built as a loop, as that would eliminate the possibility of a northern extension.
For the Parliament section, I see the tunnel being extended north along Sumach to Shuter, then west along Shuter to Parliament. It could either emerge on Shuter and make a surface right turn onto Parliament, or make that turn underground and have the portal on Parliament itself. Parliament would then be one lane in each direction plus a median LRT ROW. North of Wellesley, the road can be widened so that it's 2 vehicle lanes in each direction (or just two heading southbound if needed).
Parliament I think is a chicken and egg kind of scenario. The demand is there, but the bus runs so infrequently and doesn't really go anywhere, so not many people use it. And the E-W streetcar routes through the area are usually packed by the time they even get there (going inbound). If there were a DRL station that it could connect to, the "down and over" movement could be quite popular. Especially if an RER station is built in the West Donlands, then you'd have a subway connection at Queen, and an RER connection a few stops later. And if you stay on even longer, you could wind up at Union.