At this point I don't think such a proposal would be that bold. Barrhaven might be marginally tougher sell because of the section between Baseline station and Hunt Club. Even then I am sure most people would be in agreement that getting those sections done would make a lot of sense.
The City had made is quite clear though that Phase 2 is all they can finance within the existing debt envelope, so any future projects will need to depend on some other source of revenue. That's where my comment about additional measures comes in, because it can't simply be handled through the same financing channels as Phases 1 and 2.
Your right. The current location of the train station is an issue. But it will also have to be corrected at some point. My own guess (based on nothing substantial I will admit) is that this will be solved with a mega-project that combines a new interprovincial tunnel connection under King Edward (the so-called truck tunnel), with a new transit tunnel that would provide interprovincial regional rail/local rail. Somewhere around the Rideau/Cumberland area (close to the Rideau LRT station) you would have a new, underground, commuter rail station.
Right now that may seem like a totally way out there idea. But, given the future transit needs of Gatineau, the need for a more efficient inter-provincial transit connection, the truck tunnel (which is likely the only interprovincial vehicle crossing that would not have local opposition trying to crush it at every move), and regional rail on the Ottawa side, this will make a lot of sense in 10 years time. Will it be cheap? God no. And the only way it works is if the Feds take a key, if not leading, role in it all. The region as a whole though is growing and changing in a way that everyday it makes just a bit more sense until one day it becomes clear that this is just what they need to do (much in the same way that one day the lightbulb went off for the majority of people in the GTA and suddenly RER'ing and electrification of the GO network just suddenly made sense).
Combining it with the truck tunnel is certainly an interesting idea. I still think that the terminal would need to be in Downtown though, not in the Market. That's where the bulk of ridership is going.
My vision for the N-S line through downtown is that it would enter downtown under Bank St, pass underground between the Confederation Building and the security checkpoint for the Hill, emerge from the escarpment onto a new LRT-only bridge that would cross the river diagonally to a new elevated station across the street from Portage IV. This bridge has the potential to be a real signature bridge for the capital, especially given that the backdrop for many shots of it would be Parliament Hill.
As for regional rail, there's also nothing stopping those extensions from being built as LRT instead of RER. If you look at the map above, both the western branch of the Dominion Line and the Rideau Line follow old rail ROWs. They could be extended to Carleton Place and Kemptville respectively pretty easily. The biggest challenge, no matter how you slice it, is serving the communities east of Orleans, since no former rail ROW exists. That problem would exist for regional rail as well as LRT.
Building them as LRT would solve the 'building a new hub' issue too. The current LRT vehicles are able to travel up to 100 km/h, which would be more than enough for a regional rail type of service. Putting in the tracks and power supply may cost a bit more, but when you factor in the fact that no new downtown terminal is needed, I think it comes out on top in terms of cost effectiveness.