single-track streetcar through the old railway ROW with maybe 3-4 streetcar vehicles operating on it would be fine, and probably minimally expensive.
Run it from the GO station down to Marineland or whatever inevitably ends up replacing it with 6-7 little curbside stops and a ~15 minute target frequency to keep costs low. The ~250 person capacity of a modern LRV should be able to handle most of the demand from a GO train unloading, given the % of passengers which will be picked up / dropped off, walk off, use other services, etc.
The old ROW from the Niagara VIA/GO station doesn't reach Marineland; Falls View Casino is sitting on top of the old ROW. The more or less intact portion is here:
There's more intact to the west of the Casino (with track still in place, albeit in shoddy condition).
Most of the intact ROW to the east is currently a bike path.
The old rail bridge across the 420 is gone:
This is the end of the intact ROW, more or less:
(east side, Clifton Hill intersection)
There aren't really any 'buildings' in the way, to the west, but there is 'stuff'
Most of the rest of the route is a limited use road and parking (as far as Fallsview):
So you're looking at ~3km or so.
To get any further west you'd have to shift the route, or demo Fallsview (I'd happily vote for option 2) LOL
Still, superficially feasible. But without passing tracks, you'd have a good sized service gap, as the vehicles would need to move in lock step in one direction.
* I should add I think putting a passing track in, in one or more spots appears feasible.