If the current phase of Ontario Line stayed on Queen, then I think the preferred route for the westerly extension would be north-west or north to meet the Bloor line. Likely, turning north up Dufferin to help the traffic there, or perhaps going via Dundas West.
However, with the line swinging quite far south to reach the Exhibition, I doubt it makes sense to turn it north from there.
If Dufferin or Dundas West get a subway heading downtown, it will be better to send that line into downtown on a more direct path. Dufferin - Dundas Street, or Dundas West Stn - Dundas Street, or perhaps even Dufferin - King. That will result in added capacity into downtown, rather than piggy-backing on the OL stations / platforms.
For OL West: since the current western terminus is already in the Lakeshore West rail corridor, it would make sense to continue west from there. If that option is chosen, then surface / elevated alignment is a must. Cannot tunnel in that direction, not just because of the Humber river mouth, but even more importantly because of the high pressure
aquifer running under High Park.
On the other hand, the need to stay above surface is not a bad thing in this case, it will make construction much cheaper.
How far to go? that's debatable. A modest proposal would be to only go as far as Parkside Drive, and connect to the streetcar routes there. That would sidestep the struggles with the Bremner Blvd LRT; streetcar riders from Lakeshore West / South Etobicoke would transfer to OL at the Parkside Drive interchange to reach downtown, and avoid the slow streetcar ride along Queen West. An added benefit: downtown residents will be able to take a direct subway ride to the south side of High Park.
More ambitious options would be going to Humber Loop, or Park Lawn, or even all the way along Queensway to Sherway Gardens. Obviously, the Queensway portion would be tunneled, and that is not cheap.