2) I personally would stick with YYZ -- there are more flights thus more J seats to upgrade to.
3) The only way AC could possibly let you standby for YYZ is if there are more bums than seats in J and Y on the direct YUL flight. So, if they put you on the YYZ flight, they don't have to give you (or someone else) denied boarding compensation.
4) I can't see it being a problem.