Because a ROW is only useful when there is traffic congestion. When there is no congestion, there is very little benefit to a ROW over mixed traffic. You can see this from
Steve Munros analysis of 6's speeds.
View attachment 715258
The ROW shows its consistency during the most congested times, but because there's not really a benefit to a ROW > Mixed traffic in very early/late hours, the benefits disappear.
As for how the LRT is slower than the bus on off-peak hours... It's really all down to operations, right now. TTC is much more hands off with bus operator driving vs. LRT/Streetcar operators, and they're drilled to drive slooooww and with insane speed restrictions. The LRTs speed up much slower, coast much slower, and drive thru intersections and stations with incredibly low speeds.
The unfortunate truth is that grade separation, alone, would change nearly nothing. It would reduce time spent at red lights but it would still end up quite slow than even some other tram systems worldwide, because the TTC is just a very slow operator. From what I have heard from TTC operators, even line 5 is only allowed to operate much faster because of the intrusion system detection, and would have received the same slow orders at stns if it was disabled.