Interesting idea re: diverting the Milton line. Yes, it would mean Kipling would be removed from service as a GO station, but like I've mentioned before, and this would only make it more appealing, is to build an integrated transit hub and yard at Honeydale. That would be west of where the Milton line would veer south, and would have more convenient access for MiWay.
This may also improve the chances of the Milton line getting electrified along with Georgetown and Lakeshore, since there would be a pretty significant trackage overlap between the Milton line and the Lakeshore line. It would also be much less expensive for GO to build 2 new tracks along the Milton line west of Kipling, because IIRC the corridor is a fair bit wider than east of Kipling.
PS: With regards to the south end of the line, yes a new south-to-east and west-to-north connection would need to be built, and that could likely happen in conjunction with the grade-separation of Horner Ave, which would surely need to happen if that line is scheduled to see any type of significant GO service (it and Evans Ave are the only at-grade crossings left on that corridor).