Answer is that the cancellation does allow you to rebook, and calling BA should get you onto the AA flight or possibly BA codeshare of it regardless of award availability - this is now ec261 rather than policy. I wouldn't be in too much of a hurry to do this though as it's a long way out and there may be further changes. You can sit on the current rebooking schedule indefinitely without it taking effect until you specifically agree it and you now have a freely cancellable ticket regardless of the Avios cancellation charges.

If there is availability in Toronto then you can ask for the ticket to be changed, and because of the cancellation might get the fee waived. But they won't change it on the 300 mile rule.

I prefer BA to AA like for like in J but others have different opinions. There are nice aspects to AA and if you're booked in CW seating I'd probably go for AA, but generally I find the onboard experience nicer on BA. AA to UK doesn't give you EC261 protection but that's not the direction at issue.