Thanks for the supportive replies everyone. I'm in Beaverton about 1 hr north of Newmarket.
Re: budget. Yes I've been coming to the conclusion that $500 isn't going to do the job for an ebike with the specs I have in mind. That was an arbitrary number kinda based on what I think I could do a good job on a gas bike. I'm sure I could build something for $500, but I'd probably spend years tinkering with it, pissing off my wife and concluding that I'll have to spend more money.
This is going to sound like heresy, but the problem is cars are too efficient. After I've spent the money on licence and insurance on the toyota echo, (which I can't avoid due to the fact that I deal with Canadian winter and I have to commute to different job locations, some over 80 km away on a schedule that doesn't accomodate public transit) the further cost of gas and maintenance isn't that much.
Obviously money saving isn't the only motive for bicycle commuting, but it sure helps.
Granted a DIY ebike isn't officially legal, (neither would the motor capacity and top speed that I would require be legal either), but I don't think anyone would bother to enforce the letter of the law for years to come. A gas bicycle may fly under the radar for years, then again, maybe it wouldn't. All it would take is for one kid on a pocket bike to rip up the streets in your neighborhood for the complaints to come in. Then, the police would have a hard time justifying not ticketing motorized bicycles in the same neighborhood.
I like the moped idea. I think mopeds look dorky and are way overpriced. But if I could get one with a seized motor, I could cut it up and make it into something pretty cool.
edit: Ok I take that back about mopeds looking dorky: 2005 Tomos Streetmate moped - Toronto Scooters, Pocket Bikes For Sale - Kijiji Toronto