Personally I always pictured "fixing" the Welland Canal crossing with a bridge / overpass, not tunnel. Specific reasons include:
1. There is an absolute ton of space in the area to build it,
2. the grades work in it's favour of not having to be particularly large given the lock system adjacent to the current bridge giving the existing rail line a "natural" elevated position if the bridge is built slightly to the north, and just generally a far lower expense to construct and a lack of sensitive land uses nearby,
3. the grades allowing for a much shorter ramp on the east side of the Canal.
4. The excess amount of space would probably allow a large chunk of it to be built as an embankment, instead of an actual (much more expensive) structure.
Using a 2% railway grade, the embankment would probably begin somewhere around the Hartzel Road overpass, include a small bridge structure over the Welland Canal, then a smaller embankment on the east side to meet existing railway grades to the east close to the Seaway Haulage Road.
Orange is embankment track, green is the embankment itself, red is actual bridge structure:
View attachment 650051
It would have the bonus of grade-separating Glendale Avenue too.
Would need a lot of fill soil, but Metrolinx has no shortage of that from other projects..