In Toronto's case (and the rest of the world that is abandoning subway lines), LRT is the way to go. In the case of Sheppard and most of the other arterial roads in the suburbs (Finch, Jane), it is much more cost effective and efficient to run LRT instead of subways.
There was an article in The Star today about the TTC's report on the Sheppard line. Basically, when the plan was made as far back the the 1980s, it was thought that Sheppard is going to have much more mixed use space (commercial and residential). Now it is mostly condos that are going up, and the area does not have the density or the commercial space to support subways.
Every "advanced" or "world class city" in the world is now running LRT technology as well, and many in cold climates (ex. Calgary, Edmonton, Ottawa). So the fears that it is a glorified King St. streetcar that will lead to backups and pain are mostly unfounded (although when constructed, it will lead to delays because of the right-of-way).
Ideally, everyone would prefer subways. However, there is no money for them right now, and it would be foolish to piss away a reserve of money for one part of the cities' benefit while the rest of the 'burbs suffer with inadequate bus service.