Yes, if you buy up to US DM Silver, you will be Star Silver. If you buy up to any other level (Gold, Plat, Chairman Plat) you will be Star Gold.
As a Star Alliance elite, you will get the following systemwide benefits:
http://www.staralliance.com/en/benef...silver-status/ since Canada Air is part of the Star Alliance with US Airways.
As for the challenge, you can transfer miles out. Just remember only US (BIS) metal miles counts toward the challenge.